Globalization and its effects on developing countries

Globalization – the growing integration of economies and societies around the world – has been one of the most hotly-debated topics in international economics over the past few years. Rapid growth and poverty reduction in China, India, and other countries that were poor 20 years ago, has been a positive aspect of globalization. But globalization has also generated significant international opposition over concerns that it has increased inequality and environmental degradation. But what is the concept of globalization? Globalization is the most talked and debated issue in the contemporary world. It is a concept that escapes precise definition. In most cases, it is described rather than defined. Some commentators have described globalization as a stage of capitalism or late modernity and some remarks that globalization is a new way of thinking. However, it does not mean the same thing for all. For some, globalization is a process of opening up economies so that trade between countries could take place freely. For them increasing globalization has helped the expansion of opportunities for nations and benefited workers in rich and poor countries alike. Brings positive benefits for consumers, helping to increase choice, drive down prices, improve services and create new jobs and opportunities. Globalization can therefore be seen as a positive force for change that has the potential to raise living standards and drive economies forward.




However, this is not readily acceptable for all. Many think globalization as the concerted strategy of the industrial world, particularly of the Multinational Corporations, to safeguard their interest and spur a new form of colonization. After opening of market, LDC[1] will become a supermarket of foreign goods, which are cheaper, killing local industries, increasing many more jobless. For them, globalization means increasing poverty and deteriorating living standard of the workers, widening disparity between the rich and the poor within the country and also among the countries, and internationalization of capital to the detriment of labor market. Even for the moderates, globalization is a process of restructuring the world economy to find ways for business to maximize profits. And even some ultra-skeptics have dismissed any notion of globalization as myth; those analysts’ claims concerning globalization are greatly exaggerated, if not utter fantasy.

The IMF[2], the World Bank[i] and the WTO[3] and more generally, the high income countries are held responsible for influencing and largely determining the course of the globalization process. They are also seen as the driving forces behind the policy reforms that the developing countries had to implement as part of their structural adjustment programs under the supervision of the IMF[ii], the World Bank and the WTO. It is obvious that those countries and organizations will only foster their own interests. Globalization has become an unstoppable phenomenon affecting all aspects of our lives. Some Governments, political parties and trade unions often view this development as at best challenging and at worst sinister. Business and their representative organizations, on the other hand, promote the benefits of open trade across political boundaries and the integration of markets to create global opportunities.

Globalization is a process of increasing economic and non-economic linkages across the world. In the broadest sense Globalization implies integration of economies and societies across the globe. It is equated with the massive, irresistible cross-border flow and integration in the movement of goods, technology, labour and capital, resulting mainly from breakthroughs in transportation and communication. In a wider perspective globalization, covers various activities such as cultural globalization, political globalization, ecological globalization, economic globalization and so on. But here I am mainly discussing economic globalization and as the same time try to cover some other aspects of globalization too. Economic globalization implies increasing global inter-linkages of the markets in goods, services, capital and financing. Such a process has speeded up in the recent decade. The contributory factors for rapid economic globalization are liberalization, deregulation, privatization, and declining costs of transport and communication.




The micro-electronics revolution has irrevocably changed the essence of human contact to earth. Distances are shrinking and information is spreading faster than ever before. The internet and World Wide Web have helped this process. Perhaps the most important catalyst for globalization is the spread of information and communications technology. Through the magic of ICT[4], it is now possible to instantly access useful information through the Internet and the latest computer technology.

While talking about globalization, we must understand that most LDC national economy has not even internally integrated. Market institutions and forces are yet to emerge in a competitive way. Nearly half of the world population lives in absolute poverty and illiteracy. More than 70 per cent of the population earns livelihood from agriculture, which, however, constitutes only about 40 per cent of the LDC national income. Lack of proper planning process, commitment, accountability, and integrity of the governments, and lack of people’s participation in development activities caused that the developing countries, particularly the LDC, have not been able to substantially benefit from international trade due to both external as well as internal constraints. The developing countries have not been able to increase their share in international trade in spite of the preferential market access opportunities provided by the developed countries. It has been realized that market access for the developing countries is commercially meaningless if they cannot increase their competitiveness in the sectors in which they have preferential treatment. In the developing countries, lack of efficient production facilities, adequate infrastructure, weak management capacities, low level of technology and lack of technological capacity and inefficient transportation, communication and education, limits their potential to specialize in crucial productive sectors and to reap the benefit of preferential trading facilities.[5]

For economies like most LDC to integrate into the world trading system on terms and conditions favorable to their development needs, they need to build their capacity to negotiate at the multilateral level. This will happen only if they are able to increase their ability to understand the multilateral trading regime espoused by the WTO and formulate their national policies to benefit from it.

They also need to strengthen their capacity to benefit from international trade by increasing their competitiveness through investment in infrastructure, development of human resources, strengthening of institutional capacity, enhancement of technological capability, and supporting local enterprises, including linkages between large and small enterprises. By joining the WTO, they can now fully enjoy the rights that all members have under the WTO agreements, such as non-discrimination by other WTO members and the ability to use the WTO’s dispute settlement procedure. The membership will provide tremendous international market opportunities for LDC. However, taking advantage of the new opportunity will also be quite challenging. Most of LDC has few industries and hence very little to export. Many of them do not have enough surplus produce. Threats to domestic industries from cheap imports also loom.




ICT[6] allows trade to become simpler and more streamlined even need not and arguably should not entail universalization, thus increasing the value and speed of transactions. Companies are not limited to physical locations or their own organizational boundaries for providing products and services. Networked information systems are allowing companies to coordinate their geographically distributed capabilities and even coordinate with other organization as virtual corporation. One major advantage of promoting electronic commerce in most developing countries is that they can provide relatively cheap access to global markets even for small and medium-sized enterprises in remote areas. Small and Medium Enterprises (SMEs) have been playing a significant role in the economic development of most developing countries. Potential benefits of e-commerce for the developing countries are immense. Any company can enter global markets where size and location have become rather irrelevant. Success in e-commerce will have an immediate impact not only on productivity and profits, but also generate new jobs employment, educational opportunity and livelihood. Even that most accounts of globalization have been silent on its consequences for knowledge framework, Fredrik Hären[7] believe that ICT has even generate fundamental different methodologies in the developing countries. As the student in the developing countries can now attend some of the best international university courses online and accessing almost any information to educate themselves in the same level as their competitor in developed countries. From not having access to any books to the all books in the world.

After accession of WTO, most countries have tremendous opportunities for exporting their products in the international market. As even the former head of Iran’s National Center for Research on Globalization says Tehran should prioritize joining the World Trade Organization.[8] But to substantially benefit from international trade, LDC must need to strengthen their capacity by increasing their competitiveness through investment in infrastructure, development of human resources, strengthening of institutional capacity, enhancement of technological capability, educational improvement and supporting local enterprises, including linkages between large and small enterprises. As Esfandiar Rahim-Mashaei[9] noted that it would not be possible to attract investments without providing the necessary support to the private sector. We have been experiencing the fact that the more technologically capable countries continue to dominate their less capable counterparts, effectively monopolizing opportunities for economic growth through their insurmountable advantage in ICT. Given these diverse possibilities occasioned by globalization, it is of extreme necessity for developing countries to re-examine the trends in ICT development worldwide and devise ways by which their advantages can be maximized. This includes the need to extend the breadth and reach of ICT to peoples and sectors that stand to benefit the most, while curtailing its illicit and destructive uses. Even though there are those who do not support globalization the fact is that it is here to stay and if we do not embrace this thought we may get burned.

But the challenge for LDC is how to achieve a sustainable development in the globalize world of rapid technological change, driven by inequalities of wealth and power. And the main question is how LDC could achieve competitive advantage when the injustice global competition for educated talent has distorted the local market for educated professionals in many of LDC. As the population of the developed world ages, many countries face shortages of quality educated professionals. Western nations are turning to younger nations to fill this gap. Brain drain[iii] is a significant policy challenge for developing countries undergoing globalization. Brain drain describes the emigration of educated and highly skilled workers. Every day, in countries all over the world, people leave their home countries in search of a better life for themselves and their families. However to address the solution to those issues we may need to define sustainability and the concept of sustainable production first.

Sustainability has now become world’s number one issue to be pursued for achieving a concrete and long lasting development. It is a process, which tells of a development, which commands all aspects of human life affecting sustenance. Sustainability means resolving the conflict between the two competing goals: the sustenance of human life and the integrity of nature. Sustainability involves the simultaneous pursuit of economic prosperity, environmental quality and social equity famously known as three bottom lines. In essence, sustainability is the ability of sustaining sustainable development, which is a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations. The concept of sustainability is discussed at a time when environmental problems caused by the various human activities are requiring serious attention. Remedy lies with sustainable development, approaching the management of natural resources and the adverse effects of globalization in order to address a range of problems. In 1992, the international community as adopted at the Earth Summit[10] in Rio de Janeiro discussed Agenda 21[11], the world’s plan of action for sustainable development. It was a landmark achievement, incorporating environmental, economic and social concerns into a single framework. It contains over 2,500 wide-ranging and achievable recommendations for action on issues such as, reducing wasteful use of natural resources, fighting poverty, protecting the atmosphere, oceans, animal and plant life. So sustainability is achieved when it “meets the needs of the present without compromising the ability of the future generations to meet their own needs”.




As agreed in Rio de Janeiro sustainable development is associated with issues of social justice and the environmental democracy which stands for the creative participation of international communities in the construction of the new environmental rationality for sustainable production[12], so following the Agenda 21 as the roadmap to achieve sustainable development, brain drain in the developing countries can be solve by creation of an independent, international organization in the interest of global sustainable development to regulate the flow of people across borders and make sure that the training and education of skilled workers will not be at the expense of LDC. As a step stone for fighting poverty and promoting democracy, people in the developing countries need to be trained and having access to the education and as the training and education is still cheaper in the LDC then the developed countries. Developed countries by compensating LDC can use those people as their source for the future labour shortage and as the same time achieve economic of scale and creating a new market.

Of course the economic policy is not the only core human and social values. But as the most governments have engaged in sustainable development policies driven by the idea of economic progress this can be a good starting point followed by the pursuit of other primary concerns such as cultural promotion, ecological care, democracy and peace.

But dose the globalization and economic progress help humanity to achieve or improve our values such as ecological care, democracy and peace? To answer this question we shall define and describe each of those elements separately in details which are clearly beyond the space of this article. However as we all know economic inequality and the poverty has been the base of most human conflicts even though Paul Hirst[13] believe most likely that the environmental crises will cause the shortage of recourses, raw material, water, dry land and energy which will produce competing claims for recourses, and being the main reason for the future conflicts and wars. But even without at looking at many studies and researches which has been done on the effects of globalization on environment, democracy and peace, we can certainly claim that globalization and economic progress will help and has helped to the improvement of our living standard and so many of those values vital to us. However even though the discourse on sustainable development is not homogeneous, but most people will agree that it will be easier to overcome future global challenges with international cooperation rather segregation whatever the challenges will be, environmental degradation or regional conflicts.

International trade course


[1] Less Developed Countries

[2] International Monetary Fund

[3] The World Trade Organization

[4] Information and Communications Technology

[5] America Vera-Zavala, Global Justice is Possible

[6] Information and Communications Technology

[9] Head of Iran’s NationalCenter for Research on Globalization

[11] http://www.un.org/esa/sustdev/documents/agenda21/index.htm

[12] Enrique Leff, Sustainable development in developing countries

[13] War and power in the 21st century



[i] The World Bank is a vital source of financial and technical assistance to developing countries around the world. World Bank is not a bank in the common sense. The World Bank is made up of two unique development institutions owned by 185 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but supportive role in The World Bank mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together The World Bank provides low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes.

 

[ii] The IMF is an international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.

 

[iii] International Migration, Remittances and the Brain Drain, A Study of 24 Labor-Exporting Countries by Richard H. Adams, Jr. (link: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2003/07/08/000094946_03062104301450/additional/124524322_20041117164551.pdf )