I.

Introduction

The prevailing theorizing of globalization’s influence of human well-being suggests to

assess both the favorable and unfavorable outcomes. This study formulates a dialectical

model, adopts a comprehensive globalization measure and uses a three-wave panel data

during 1980-2000 to empirically test direct and indirect effects of global flows’ human

consequences. The outcomes from random effect modeling reveal significant positive

impacts of political globalization, whereas economic and social globalization do not generate

favorable influences when development level and regional differences are operated as

controls. The overall globalization index is found to generate expected favorable influence on

an overall human development index. Within developing countries, globalization’s human

influence was not as significant as in industrial countries, however. Several hypotheses

about globalization’s potential negative effects through increasing societal instabilities and

reducing state power and social spending are not supported in analysis. It is concluded that

globalization identified by increased global flows and exchanges contributes rather than

hampers progress in human welfare.

Globalization manifests itself as a fundamental change of human institutions in the

contemporary era. While the literature agrees that the rapid and intensive flows and

connections of goods, services, money, people and culture beyond national borders indeed

define the fundamental characteristics of the current world society (Guillén, 2001), its human

consequences remain unsettled. Two theories prevail in debate over how globalization

affects human well-being. The neoliberal school contends that globalization is an

omnipresent power of ‘creative destruction’ in that global trade, cross-border investment and

technological innovation enhance productive efficiency and generate extraordinary prosperity

despite old jobs are replaced and the wages for unskilled workers necessarily fall.
1
Globalization manages these potential threats by signaling to the latter group about the pay-

offs from acquiring additional skills. Benefits can spread over the masses ‘if the labor market

is responsive to changes in supply and demand’ (Grennes, 2003). Relevant empirical studies

additionally documented that globalization had operated to spread industrialization into

developing countries (DCs) and thus reduced global income inequality (Firebaugh, 2004).

Economic integration approximated by foreign trade was found to be closely related to

institutional building of a society, which constituted a decisive factor of economic growth

(Rodrik, Subramanian and Trebbi, 2004).

The second approach sees globalization as a new hegemonic project that

transnational capitals operated in ways that promised few betterments for most countries.

According to Petras and Veltmeyer (2001), globalization demonstrates a creation of a new

world order architectured by global powers (the industrial countries, international financial

institutes, etc.) to facilitate capitalist accumulation in an environment of unconstrained market

transactions. Petras and Veltmeyer foresee ‘a world-wide crisis of living standards for labor’:

the brunt of the capitalist globalization process has been borne by the working class, as

‘technological change and economic reconversion endemic to capitalist development has

generated an enormous and growing pool of surplus labor, an industrial reserve army…with

incomes at or below the level of subsistence.’ For critics of globalization, contemporary

global systems on its mainly neoliberal course had imposed a ‘flexible’ mode of production

that undermined the redistributive mechanisms that were built up through the Keynesian

social democracy. Globalization features a ‘market ethos’ whose fervent pursuit of private

interests operates without regard for persons (Smart, 2003). Resultantly, an unequal

allocation of benefits and harms is generated that favors the already advantaged (Scholte,

2000). Although this radical position was not explicitly endorsed by Sirgy (2004), they do

2
predict several negative outcomes following this line of reasoning, thus suggesting

assessment of globalization’s “double-bladed” outcomes.

This study attempts to offer an integrative model that clarifies a plethora of

mechanisms by which globalization generates favorable and unfavorable human

consequences. Sirgy et al. (2004) explicitly asserts the important role of the state in

enhancing a decent life condition in this global age. Yet, how such state actions emerge or

fail to appear is not satisfactorily specified in the current debates from the neoliberal and

radical camps (World Bank, 2002; Petras and Veltmeyer, 2001). Neither in Sirgy et al.

(2004). Formal elaboration of the relationship of the state and globalization is thus important

to arrive at a better understanding of the issues at hand.

II.Review of Related Studies

Local Related Studies

Most economists and scholars of globalization think that free trade emerged during the

Industrial Revolution and the heyday of Western empire building, a period roughly from 1870 to

1914. During this time, Europe’s colonies in Asia and Africa supplied raw materials to European

manufacturers and were markets for European goods. Free trade zones, or the unhampered

movement of goods, capital, ideas and people, were essential to a globalized economy. Arturo

Giráldez, a professor of Spanish and global economic history at the University of the Pacific

begs to differ. Over the course of his long career, he has told a far different story. For him, the

birth of globalization occurred in a radically different place and time. In his latest book, The Age

of Trade: The Manila Galleons and the dawn of the global economy, published in 2015, Giráldez
3
begins the story of globalization several centuries earlier and puts the Philippines at center

stage. From about the late 15th century, every major European power nursed a grandiose but

simple ambition: to secure all-important sea routes to the spices, silks and other riches of the

East. Ownership of the Moluccas, better known as the Spice Islands, and control of the trade in

cinnamon, cloves, nutmeg and pepper, that is, the spice trade, then the most lucrative trade in

the world, centrally figured in dreams of an empire in the Pacific and motivated extraordinary

voyages, from Christopher Columbus (1451-1506) to Vasco da Gama (1469-1524).

Arguably, the Dutch came closest to realizing this dream. Soon after their arrival in the

Indonesian archipelago around 1600, the Dutch wrested control of the Moluccas from the

Portuguese. A couple of years later, the Dutch East Indies Company, the Vereenigde Oost-

indische Compagnie, better known as the VOC, was formed. The VOC turned the port city of

Jayakerta on western Java, into the capital city of Batavia and its main Asian headquarters,

established trading arrangements with the Japanese on the artificial island of Deshima, in the

port of Nagasaki in Japan, and through ruthless ‘total war’ campaigns, enforced a trade

monopoly on nutmeg, cloves and mace on the Spice Islands, in addition to securing much of the

trade in pepper and cinnamon. At their zenith, VOC territories and trading posts stretched

between the Cape of Good Hope and Japan and annually imported to the Netherlands six

million pounds of black pepper.

Manila Galleon being attacked by British ship.

As the Dutch ascended, Spain, in comparison, suffered her share of setbacks: she had

lost her crucial claim to the Moluccas and the spice trade to Portugal in 1529. But she was far

from being outdone. Spain had gained a foothold in the Pacific by colonizing the Philippine
4
archipelago and, thanks to the ingenuity of the circumnavigator and Augustinian friar Andrés de

Urdaneta (1498-1568), had discovered a fast and efficient return route across the Pacific to

Mexico, a critical factor to the commercial success of the Spanish expedition to the East Indies.

With his colleagues Dennis O. Flynn and James Sobredo, Giráldez builds the case for a history

of globalization that begins in the Pacific. Urdaneta marks the crucial turning point. The

Augustinian had sailed northeasterly from Cebu and, climbing between 37 and 39 degrees, his

ship caught the prevailing westerlies across the Pacific, skirted the California coast, and

reached Acapulco with a total journey time of four months. With this route secured, Spain

established the trans-Pacific galleon trade with the first of the ‘Manila galleons’ sailing for

Acapulco in 1572, and the last in 1815. Departing from the colonial capital city of Manila, galleon

ships annually set forth westwards to Acapulco in Mexico bringing Chinese silks, spices and

other treasures from the East to return loaded with silver from Spanish America.

While costly to maintain by an overstretched royal treasury, the galleon trade at its peak

was capable of financially bolstering the Spanish empire, and its economic success continued

well after the initial spectacular commercial boom of the late 16th and early 17th centuries. The

galleons were the richest ships in the world and through trans-Pacific trade, Spain came to

dominate commerce in both silk and spices. The Manila-Acapulco voyages also enabled

important botanical exchanges. Coconuts from the Philippines taken aboard Manila galleons

were responsible for the introduction and spread of modern coconut populations in Mexico and

southwards to Peru. The return route introduced many New World plants to Southeast Asia:

cereals and beans, maize, sweet potato, fruiting trees, peppers, peanuts and pineapple,

5
medicinals and textile plants. Vanilla reached the Philippines possibly from Guatemala or El

Salvador.

Manila became a contact point for the meeting of peoples, ideas, and goods. Within 50

years of its founding, the city was transformed into the colony’s preeminent political, religious,

multiracial, trading hub, and one of the wealthiest and greatest entrepôts in Asia. Over three

months in the year, from between March to June, Manila’s inhabitants and merchants engaged

in feverish commercial activity. The trade required little effort and minimum business acumen,

while the profits that could be reaped could make an entrepreneur fabulously rich. But it was a

high-risk affair and financial losses could also be steep. The months-long two-way crossing was

exceedingly perilous. Reliant only on wind and rowing power, the galleon traversed the roughest

seas, storms, and treacherous currents. When a ship was wrecked or attacked and looted,

investors were left ruined and communities were reduced to destitution and starvation. Even

then, globalization had its dark side. The demand and supply commerce, and the route taken to

facilitate it, Giráldez argues, were far-reaching. Two world regions came into contact with one

another for the first time through the direct exchange of goods and the histories of four

continents—Europe, the Americas, Asia, and Africa, were influenced by free trade and a

globalized economy that began in the Philippines.

Economic Liberalization

Economic liberalization attempts to create a relatively borderless economy through the

dismantling of controls on the flow of goods, services and capital, allowing less restricted entry

of foreign investments. Although seemingly neutral, this process has a devastating impact on

Third World countries’ economies as ‘powerful countries [push] for ‘free trade’ while engaging in
6
extreme protectionism’ (IBON Facts & Figures, 2004a: 3). The General Agreement on Tariffs

and Trade (GATT) under the WTO enshrined the fundamental principle that export goods

should freely enter into the importing country based on the premise that free trade would benefit

equally all WTO member countries. To the contrary, what has happened can be best described

as ‘unfair trade’. For instance, while annual global trade had reached US$7 trillion in 1999, the

total exports of developing countries represented only 28%, while the the share of the least

developed countries was 0.5%; North America and the EU had the largest share of world trade

in goods and commercial services (del Rosario-Malonzo, 2001:2).

In the Philippine case, economic liberalization has reduced protective tariffs and trade

restrictions, giving free-play to the market. For example, the average tariff was reduced from 43

percent in 1980 to 28 percent in 1986, and restrictions on more than 900 items between 1981

and 1985 were lifted (Bello, 2004:16). Import of goods from other countries has been less

restricted, so that the percentage of goods under import restrictions has been progressively

reduced from 34 percent in 1985 to 17 percent in 1986 and 8 percent in 1989 (Yoshihara,

1994). This progressive loosening of import restrictions vis-à-vis export stagnation has

contributed to widening the trade deficit by 307% as of 2003 (Guzman, 15 July 2004:12). Import

liberalization is justified by the notion that this is good because consumers will have multiple

choices and the ensuing competition will reduce prices. But flooding the market with imported

goods destroys local industries and livelihoods, resulting in increased poverty and

unemployment.2 The reduced rate of protection for manufacturing (from 44 % to 20% within a

period of two decades) has resulted in bankruptcies of local industries as locally produced

goods suffer from unfair competition by cheap imports. Among the industries severely affected

were ‘paper products, textiles, ceramics, rubber products, furniture and fixtures, petrochemicals,

beverage, wood, shoes, petroleum oils, clothing accessories, and leather goods’ (Bello,
7
2004:25). Of these, the textile industry suffered the biggest blow: it ‘shrank from 200 firms in

1970s to less than 10’ (Ibid). It can be argued that the shrinking of local industries contributes to

the massive displacement of workers (IBON, 2006a). Rosario Bella Guzman (2004:14) says:

‘Every day for the past four years, eight establishments retrench their workers or close down

due to economic liberalization: 196 workers are being displaced every day as a result’. The

Philippine Department of Labor and Employment reported that a total of 287, 556 workers were

displaced within a period of four years (2000-2003).3 In January 2006, the number of Filipinos

unable to find work increased by 15% from previous year, bringing the number to 2.8 million

from 2.5 million in 2005 (IBON, 2006b).

Philippine agriculture also suffered from the implementation of the WTO’s Agreement of

Agriculture (AoA). Although world trade increased by 25%, Philippine products’ access to the

world market was restricted, resulting in accumulated trade deficits of $5.2 billion since 1995.

Since the WTO regime, the agricultural share of the Philippine GDP (gross domestic product)

has been declining: down to 18% in 2002 from 28% in the pre-WTO regime. This decline in

agricultural productivity coupled by unrestricted imports has contributed to the decline in

agricultural jobs (since 1994 when the Philippine government signed the WTO), devastating

farmers’ livelihood. In 2000 alone, approximately two million jobs were lost (del Rosario-

Malonzo, 2004).

The less restricted entry of agricultural products creates import dependency for basic

needs and ultimately results in food insecurity. Under the WTO’s AoA, the Philippines is

required to allow the progressive importation of rice (1% of domestic consumption in 1995, 2%

in 2000, and 4% by 2004) and the tariffication of rice was required to start in July 2005 (del

Rosario-Malonzo, 2004b:4). This has partly, if not significantly, contributed to the Philippines
8
becoming a net importer of rice. For example, data from the Bureau of Agricultural Statistics

show that from 1995-2001, rice imports were greater than rice exports (Ibid). And in 2002 alone,

rice importation reached roughly 1.25 million metric tons, which was higher than the previous

year’s total of 808,250 metric tons. The unrestricted importation of cheaper rice did not result in

lowering the price of rice since rice traders continued to sell it at higher prices in order to

maximize their profit . The result was food insecurity that threatened the majority of the Filipinos’

access to their staple food, and increased the vulnerability of those with special nutritional needs

such as poor pregnant women and children.

This is another manifestation of how an unregulated market serves the interests of

capital, that is, of transnational corporations and richer foreign nations that are able to control

the local market, forcing local production and local entrepreneurs, especially those engaged in

small-scale industries, out of the market. Thus, economic liberalization has entrenched foreign

control of the Philippine economy—a process that was initiated during colonialism and that has

continued in the neo-colonial or post-colonial period.

Foreign Related Studies

Globalization, Societal Instability, and the State

Arguably a country immersed in vast global flows may encounter greater external

exposures that lead to greater societal instability. As Marx and Engels ([1948]1978:476) long

pointed out, the dynamic revolutionizing of production for the world market necessarily

generated ‘uninterrupted disturbance of all social conditions everlasting uncertainty and

agitation’. The dominant global forces had imposed institutional changes on countries highly
9
dependent on external demands. To have greater access to ‘world market’ or foreign credits

promised by the World Trade Organization (WTO), World Bank and the International Monetary

Fund (IMF), countries needed to initiate ‘free market reform’ (‘structural adjustment programs’),

irrespective of their national economic situations. These imposing practices accentuated an

asymmetrical power within the global system to the disfavor of DCs in particular. In many

countries following market-oriented prescriptions, social disequilibrium such as increased

unemployment as well as rural emigration resulted as a consequence of failing economies, as

many African and Latin American countries had demonstrated (Boafo-Arthur, 2003; Geo-Jaja

and Mangum, 2001). The literature also compared East Asian states before and after the

financial crisis of 1997 as evidence that unregulated global financial flows (including

internationalized domestic firms) inflicted painful adjustment costs on the domestic population

(Hirst and Thompson).

Critics of globalization believe that it necessarily produces unfavorable human influences

additionally by weakening the capacity of the state. Agencies of globalization (the WTO, IMF,

etc.) had pressured governments to undertake market-oriented reforms by reducing fiscal

expansion and cutting social spending. As high taxes will encourage capital to migrate,

countries that wish to keep the existing TNCs and highly skilled labors within the territories have

few alternatives but to bring down their tax to the levels prevailing elsewhere. A likely outcome is

a government forced to decrease public resources for welfare provisions (Panić, 2003).

However, Sirgy. (2004) propose an alternative hypothesis of an expanded state in

globalization: certain inflows such as trade and capitals can increase tax revenue (Prop. 9,

p.283), allowing the state to spend more in areas such as health care, education, public safety

and leisure that are important for human well-being (Prop.9, p.283, also p.294). In contrast to a
10
group of “hyper-globalists” that predict reduced government power to control “national”

resources surpassing borders (Ohmae, 2000), Sirgy et al. (2004) maintain that social protection

policy depends on a responsive state, which predicates on its effective capacity to intercept

revenues by taxing global glows of capitals and goods over its territory. In accordance with

certain researchers (Hirst and Thompson, 1997; Riain, 2001), Sirgy et al. (2004) agree that in

the global age, the state must construct a distributive coalition and achieve social consensus in

ways that major organized interests, domestic or foreign, are accustomed to bargain over

developmental goals and make commitments to these policies. The national government

remains an influential agency with extensive public resources and powers to sustain social

stability. Evidence from industrial countries had documented that societies that are highly

exposed to external risks developed a larger government as shelter. Openness might translate

into more generous social programs (Rodrik, 1997). Globalization increases rather than

suppresses the likelihood of compensation policies. Concerning this hypothesis, Garrett (2001)

believes that the state generally failed to compensate losers in globalization as his cross-

national evidence indicated low correlations between trade and total government spending.

However, Garrett’s (2001) measure of state compensation (the size of the state) is not adequate

to reveal state effort in improving social securities. The causal relationship between

globalization, state power and social protection remains unsettled and needs empirical testing

by exploiting better measures and including DCs as sample.

According to the United Nations Development Programme (1996) the gap between

countries has widened, even though there has been worldwide surge in economic growth over

the past decades, but it has benefited only a handful of countries. More specifically, the benefit

of global economic growth has been concentrated in just fifteen countries. Whereas, eighty-nine

other countries which represent 1.6 billion people or one quarter of the world population are
11
economically worse off than they were ten or more years ago (United Nations Development

Report 1996). Out of these eighty-nine countries seventy are low income and developing

countries. There income level has fallen below those of the 1960’s and 1970’s. As a result, the

poorest 20 percent of the world population saw their meager share of global income cut nearly

in half over the past three decades, while the richest 20 percent of the world’s population

increased their share of global income by 15 percent in the same period. In other words, the

income share ratio of the world’s richest and poorest people have doubled during this time;

increasing from 30:1 to 61:1. The above findings lead to conclude that “in the past 15 years the

world has become more economically polarized – both between countries and within countries.

If the present trends continue, economic disparity between the industrial and developing nations

will move from inequitable to inhuman”(U.N. Development Programme 1996, P111).

In global society nations have differing amounts of power and want to ensure that their

interests are met. The developed and less developed countries of the world experience serious

inequalities in wealth that have immediate consequences for their citizens. The low-income

countries are poor because of the policies and practices and the high income countries pursue

in order to mass a greater share of global wealth. Because of their policies and practices the

low-income countries are in a position of relative dependency on high-income countries

(Renzetti & Curran 1998). Powerful nations, like powerful ruling classes, seek to retain their

favored positions while keeping other nations in their place. In a global economy, such

dominance is accomplished through financial pressure, such as powerful industrialized countries

set world prices on certain goods, rather than use brute force (Chase-Dunn and Rubinson

1977). The economic base of poor countries is weak, therefore they often have to borrow money

or buy manufactured goods on credit from wealthy countries. The huge debt they build up locks

them into a downward spiral of exploitation and poverty. As a result, they cannot develop an
12
independent economy of their own and thus remain dependent on wealthy ones for their very

survival (Frank 1969). In short, just as upper-class people can exploit and exercise power over

lower-class people within a society similarly, wealthy countries can exploit poor countries in the

global market place. In consequence of it the global economic gap has widened (Newman

2002).

III.Body

The evidence suggests that in the past century more advances have been seen in global

prosperity and more people lifted out of poverty than in all human history. There are many

reasons for this achievement, but globalization has played an important catalytic role. World

poverty has fallen dramatically in the past 30 years. For example, since 1970’s the development

in China and India has played a significant role in reduction of the world poverty. However,

economic growth is not balanced across the globe. Some countries have witnessed

tremendous growth and others have fallen in poverty. For example the Sub-Saharan Africa

requires greater focus to deal with poverty (Barro 2002).

The present uneven economic growth trend has widened the gap between developed

and developing countries. According to economic forecasts if the current pattern of uneven

economic growth continues, the poorest countries of the world will grow even poorer while the

richest countries will become even richer. For example it is estimated that by 2030, global

production will triple. However in Sub-Sahara Africa, per capita income will fall to just $32 a

year, whereas in high-income countries, average per- capita income will approach $40,000.

Many of the countries of East Asia are expected to catch up to the high-income countries in

terms of per-capita income. By 2050, china’s per capita income is not likely to approach that

level until at least 2080, and India’s will not reach the $40,000 per capita mark until about 2130
13
the twenty second century (United Nations Development Programme 1996). The present world

unbalanced and uneven economic growth has raised a question can this gap between the rich

and poor nations will be narrowed rather than widened in the future? This question has made

professionals and global society to rethink about the impact globalization and future of rich and

poor countries (Renzetti and Curran 1998).

The Philippines is one of the developing countries in Asia that has been greatly

influenced by globalization. Globalization is the interconnectedness and interdependence

established among countries around the world. This idea of interdependence typically has

positive and negative effects to the economy. However, their lower dependence on exports

influences the Philippines to receive more positive than negative effects to their economy.

The ever-changing issues of poverty, hunger, and suffering in the Philippines poses as a

hindrance to their economy. However, their reliance on the agricultural sector allows them to

resolve these issues and keep them minimal. In fact, two thirds of the Filipino population

depends on the agricultural sector. In addition, the Philippines has an abundant amount of

natural resources due to their foreign trade with other countries and their contribution of

exports. The combination of the agricultural sector and abundance of natural resources helps

the Philippines have a successful economy because this balance allows them to both receive

and give away resources. With their reliance on the agricultural sector, their contribution of

exports involves fruits and vegetables. The export of fruits and vegetables, especially pineapple

products and bananas, plays a key economic role every year. This interdependence is

economic because the foreign trade between countries benefits the overall economy

(Villanueva 2010).
14
 While discussing the idea of natural resources in the Philippines, we also have to

consider the resources produced in this country. The Philippines produces several minerals

such as copper, gold, nickel, chromium, iron, and manganese. These minerals are essential

due to the growth in the mining industry and the fact that mining will continue to be an important

element in sustainable life. Although the production of minerals is beneficial to the economy, it

acts as a hindrance to it as well. Gold mines, in particular, cost a significant amount and are not

considered as a negative aspect of the economy. The rapid growth of globalization is actually

having a negative effect on the Philippines because they are unable to keep up with these

vastly changing expenses (Villanueva 2010).

Finally, the total value of imports surpasses the total value of exports. With the total

value of imports being $59.9 billion and the total value of exports being $50.72 billion, this $9

billion difference definitely benefits the economy. This discrepancy benefits the economy

because the Philippines is receiving more goods rather than losing goods through exports.

Their primary exports include semiconductors and electronic products, petroleum, transport

equipment, garments, copper products, coconut oil, fruits, and vegetables. These exports are

mainly sent to the United States, Japan, Netherlands, Hong Kong, Germany, China, Singapore,

and South Korea. Contrastingly, the major goods the Philippines imports from other countries

are electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile

fabrics, grains, chemicals, and plastic. Most of our import partners are the same as our export

partners; however, we import goods from Taiwan and Thailand as well (Economy Watch 2010).

Globalization has had more positive effects than negative effects in the Philippines. Their

balance of imports and exports has strengthened their economy. In addition, the surpassing
15
value of imports compared to exports shows that the Philippines receives more resources than

they lose. Globalization can be related to social development, cultural, or economic. In this

case, economic globalization has had the biggest impact.

Deregulation

Deregulation goes hand in hand with liberalization and limits the state’s role in regulating

the economy in the interest of its people and national sovereignty. It gives free reign to market

forces in the organization of economic activities placing the highest value on profit, sacrificing

consumer and labor rights, as well as social and political rights. In the Philippine context,

however, the nation state becomes what William Robinson (1996) calls the ‘neo-liberal state’,

which, in this case, I would call the peripheral neo-liberal state since it becomes instrumental to

neo-liberal policies largely controlled by core countries.

Privatization

In the Philippines, privatization facilitates the penetration of foreign capital into sectors of

the economy that might have been under state control or under the control of local

entrepreneurs and communities (Bello, 2004:192-193). This process entrenches foreign control

of the local political economy, especially by transnational corporations. Thus, privatization

opens new frontiers for the expansion of capital and profit-making on a global scale, while

further minimizing poor people’s access to basic social services.

In the Philippines, the privatization of health care, which has been carried out in

compliance with the dictates of the IMF’s structural adjustment program, is slowly but surely
16
killing the poor, especially women and children. The current government’s Health Sector

Reform Agenda and Executive Order 102 have diminished the role of the State in the provision

of health care services (HEAD, 2001:2). Consequently, 38 public hospitals intend to privatize by

2010 (Ibid:9). The privatization of health care will deny affordable and accessible basic health

services to the poor, estimated by IBON Databank Foundation to comprise 88% of the

Philippine population (Roque, 2005). Increasingly the government has decreased its budget

allocation for government hospitals where the poor go. For example, from 1999-2001 there has

been an accumulated decrease in the hospital budget for ten government hospitals in Metro-

Manila amounting to more than PhP307 million (HEAD, 2001:21). The Philippine Constitution

requires that 5% of the GNP be allocated for heath care services, but in a span of 15 years, the

GNP allocation averaged less than 1% (.6%). Ultimately, the main beneficiaries of health care

privatization will be the transnational pharmaceutical corporations,5 while poor women and

children, who have special health care needs due to changes in their life cycles, will be most

detrimentally affected. Furthermore, the privatization of health care reinforces the IMF’s

structural adjustment policies on Philippine political economy as it opens new areas for

capitalist penetration. The IMF benefits as well from interests paid on its loans that partly come

from cuts in government spending on social services, making those services less accessible to

poor women, men, and children.

Finance Capitalism

Some analysts argue that one of the crisis of monopoly capitalism is manifested in ‘the

crisis of over-production’ (Sison, 2005), which means that transnational corporations have to

seek other spheres from which to make profit besides investing in the production of

commodities deemed no longer profitable. The crisis of over-production is partly created by the
17
depression of wages that consequently contracts the market. While advances in technology

have allowed transnational corporations to increase production of goods, they are producing

more than the world’s consumers can buy (Villegas, 2000:72). Finance capitalism, making profit

out of money, then becomes central to neo-liberal globalization to deal with the crisis of over-

production, which is its own creation. As a result, finance capitalism gives priority to financial

speculation over human needs, increasing speculative investment more than productive

investments that can generate employment. Thus, while in 1976, 80% of all international

transactions involved the buying and selling of goods and services, by 1997, only 2.5% of

international transactions involved such transactions; 97.5% were for speculative investments

(EILER, Inc., 2000:7-8). In the Philippines, finance capitalism is partly reflected in the

progressive increase of portfolio investment. For example portfolio investment has increased

from 66% in 1993 to 70% in 1994, to 75% in 1995, to 86% in 1996. By the first quarter of 1997,

portfolio investment reached 70% of total investment flow. Overall, 85% of portfolio investment

is foreign, with the US taking the lead (33%) but has the least share of direct (productive)

investment at only 6% (Villegas, 2000:47).

Financial capitalism also involves opening the Philippine financial and banking systems

to greater foreign control. This has resulted in mergers and consolidations that displaced

thousands of male and female workers (approximately 7,000 bank workers), while the small

local corporate elite and foreign investors increased their profits (Villegas, 2000:43,46). The

increased unemployment that is produced by finance capitalism further heightens the rate of

poverty in the Philippines. The problem of unemployment gets even worse when we look at

labor flexibilization.

18
 IV.Summary, Conclusion

Summary

The arrival of globalization has brought about a lot of challenges for nations to meet. This

paper takes a look at the capability of the Philippine state to cope with the demands of globalization. It

documents the rules, laws, regulations, institutions and agencies that underlie the administrative

capacity of the Philippines to promote trade and investments, and thereby achieve economic growth.

A review and analysis of Philippine practices and experience is undertaken to determine the state’s

readiness for globalization. The study will cover three aspects of state capacity that contribute to the

promotion of trade and investments: (1) administrative capacity, (2) systems of transparency and

accountability, and (3) legal and judicial frameworks. Finally the paper recommends areas wherein

the Philippine government must focus on based on the three aspects as well as suggests follow up in-

depth studies on issues covering: capacity to promote healthy competition; regulatory framework and

capacity; capacity to develop industries, sectors, and regions; policies for social development,

redistributive justice, and poverty reduction; policies to promote performance, productivity, and

competitiveness; and policies to protect the environment.

Conclusion

This study investigated the effect of globalization on progress in human well-being by using a

time-series cross-national data during 1980-2000, a period that observed an extremely high tide of

global flows crossing borders to deepen international economic integration, establish supranational

governance, and foster cultural harmonization. By way of engaging in the debate initiated by Sirgy et

al. (2004) concerning the potential relationships between global flows and human QOL, this study

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specifies a dialectical model to clarify the complex double-bladed processes in which globalization is

hypothesized to have generated contradictory human consequences.

The empirical evidence supports the positive effect hypotheses that globalization produces

favorable influence in human development. Somewhat surprisingly, the main effect of globalization is

primarily contributed by political globalization. It appears that as the national states are deeply

involved in what is called ‘transgovernmental networks’, they can develop close relationships with

numerous public, international non-governmental and private commercial bodies to deal with

domestic policy issues such as human resources, health and environments, and in this way benefit

from the global system (George and Wilding, 2002). Economic globalization perhaps has an affinity

with the neoliberal policy that might have offset its potential contribution to human well-being. Social

globalization encourages intercultural exchanges whose welfare effect is not as remarkable as

expected. On the other had, the adverse effect hypothesis of the dialectical model does not receive

much support. Those countries that had experienced more global flows and exchanges did not

resultantly demonstrate social structural instabilities, reduce state revenue, and trim down social

securities spending. Although the current literature together proposes dialectical effects of

globalization on human well-being, the evidence this study gathered tilted toward the argument for

globalization rather than against it.

But why the adverse human consequences of globalization anticipated by its critics was not

present in the current study? It is speculated that for those societies that had obtained higher levels of

globalization, institutional reforms might have been accomplished and thus have mitigated the social

frictions and economic setbacks associated with rapid ‘fluxes and flows’(Rodrik, 2004). Notably,

developing countries that remained relatively closed and delinked with other societies might have

certain institutional weaknesses that have deterred them from benefiting via globalization. In sum,

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from the cross-national research perspective, that globalization should shoulder primary responsibility

of human underdevelopment in contemporary era is at best a postulation rather than a social fact

grounded on solid empirical evidence.

Two limitations of this study should be indicated. First, in measuring human QOL, subjective

well-being is not used due to data scarcity. Investigation into this psychological dimension can enrich

understanding of human impacts of global transformation. Second, globalization as the radical school

conceives to be ‘predatory’, that is, global capital combined with neoliberal regimes (minimizing

economic regulation, tightening fiscal discipline, unrestricted currency repatriation, etc.) imposing over

governments operating at the level of sovereign state, is not fully evaluated (Falk, 1999). In contrast

to global flows, this aspect of global hegemony needs empirical assessment to arrive at full

understanding of globalization’s human consequences.

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 Bibliography

Impact of Globalization

in the Developing Countries http://ftp.iza.org/dp1925.pdf

Impact of Globalization on World Society https://www.hsu.edu/academicforum/2004-2005/2004-

5AFImpact.pdf

Does Globalization Affect Human Well-being?

https://pdfs.semanticscholar.org/1720/acc411e5437f6ecf0b6319fb79c50dde08dd.pdf

Globalization and State Capacity: The Philippines https://dirp3.pids.gov.ph/ris/dps/pidsdps0320.pdf

GLOBALIZATION AND NATION-BUILDING IN THE PHILIPPINES:

https://apcss.org/Publications/Edited%20Volumes/GrowthGovernance_files/Pub_Growth%20Governa

nce/Pub_GrowthGovernancech16.pdf

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