Globalization – For Better Or For Worse? An Introduction History Arguments For Globalization Arguments Against Globalization.

Globalization – For Better Or For Worse?

• An Introduction• History• Arguments For Globalization• Arguments Against Globalization

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Introduction

What is Globalization?• ” Globalization is a phenomenon whose

economic dimensions involve increases in the flows of trade, capital, and information, as well as mobility of individuals across borders”

• “Globalization is characterized, in particular, by an intensification of cross-border trade and increased financial and foreign direct investment flows, promoted by rapid liberalization and advances in information technologies”

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History First wave (1870) - Big increase in flows of capital, people and trade driven by liberalized policies and technology innovations.Interwar collapse of Globalization - continued technology progress, but complete reversal of policies, a retreat into nationalism and protectionism.Second wave (after WW2) - restored the level of integration in wave one, in terms of trade. We don't see a restoration of globalization in terms of capital flows and flows of people. Third wave (currenct wave) - two dramacitally differences:

1. GDP rises to unprecedented levels.

2. The structure of trade is transformed.

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Transformed Trade1980: three-quarters of developing country exports were primary commodities – minerals and agriculture. Today: 80 percent are manufactures. Will this have a big impact on poverty reduction?

1. Commodity exports benefit the owners of land.

2. Labour intensive manufactured goods tend to benefit a much wider segment of society, especially people who own the labour, the skills.

How did this happen? 1. Lowered barriers, market access.2. Improvement in developing

countries.

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Economic Growth – Some Examples

Of course – Growth by itself is not very interesting!Uganda and Vietnam –

1. Began integrating rapidly with the world economy in the 1980s.

2. Later than most other “more globalized” countries.

3. But they nonetheless achieved rapid growth and rapid poverty reduction.

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PovertyThe number of absolute poor in the world rises inexorably right through until about 1980.Then for the first time in world history, we see substantial absolute declines in the number of poor. The number of people living in extreme poverty began to fall in the 1980s and continued to fall through the 1990s, even as the world population grew by 1.6 billion in 1980-2000. Anything to do with global markets?

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Integration and economic growthBefore 1980 - division between the North and the South.

After 1980 - division within the South.

More globalized countries – 3 billion people (India, China etc.).

Less globalized countries – 2 billion people (sub-Saharan Africa, the Middle East and former Soviet Union).

The gap is narrowing between the rich countries and the more globalized countries, BUT SOME ARE LEFT BEHIND!

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Arguments For Globalization:

International trade and investment have been the engines of world growth over the past 50 yearsThe tonnes of goods traded around the world have grown by 16 times since 1950, reflecting the lowering of tariff barriers.The benefits of that growth have been sharedThe countries that are getting poorer are those that are not open to world trade, notably many nations in Africa.

1.Trade:

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Many people believe that exports create jobs, and imports cost jobs and that it therefore makes sense to have barriers against imports. This thinking led to the Great Depression in 1930, because so many countries had erected barriers against imports that global trade fell with catastrophic consequences.Companies of all sizes are involved in world trade – the benefits do not just flow to large multi-nationals. In most trading nations, raging from Thailand to France, small firms employing less than 200 people account for between 10 and 25% of exports.

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2. Environmental Issues:

The remedy is to make the polluter pay. Indeed the principle that the polluter should pay underlies both the Kyoto Protocol greenhouse gas emissions and agreements to control acid rain in the United States and Europe.What is required to impose ‘polluter pays’ principles on a global basis is stronger democratic institutions so that those who feel the impact of pollution can exercise their political rights to have it stopped.

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3. The Internet, Communication

and Technology: Technology can do much to reduce poverty and environmental damage. It can increase the supply of food and reduce morbidity and mortality, particularly in Africa.DC see Internet as an opportunity to gain access to knowledge and services from around the world. To both import and export.The internet may also facilitate opportunities for economic development in industries such as tourism.Communication infrastructure - Mobile telephony vs poor land line telephone system.

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Globalization has drastically improved access of technological latecomers to advanced technologies and, to the extent that technological upgrading is important for development, it provides a unique opportunity for low-income countries to raise per capita income. Research shows that improved access to technology imports is improving the demand for skilled labour in many low-income countries."The Internet does not act like a cybermissionary. Instead it acts like a universal conduit, carrying ideas and information from one place to another".

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Globalization Alternatives

The increase in world trade as a proportion of world GDP was proportionately greater between 1870 and 1914 than it has been since 1975. That expansion was stopped, not just by the first world war, but by the loss of support for free trade which followed. Tariffs and controls on capital were imposed around the developed world. This led directly to the 1930 depression and indirectly to the second world war.

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Arguments Against Globalization1. Globalization increases the gap between

rich and poor countries:Over the past ten years, the number of people earning $1 a day or less has remained static at 1.2 billion while the number earning less than $2 a day has increased from 2.55 billion to 2.8 billion people. The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995.

2. Trade between industrialized countries and developing countries is of relative small range,eg. the USAs trade with developing countries is only about 4 percent of GDP.

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3. Cooperation on globalization was initiated by the richest even from the beginning and it is still these nations who set the agenda for discussions and decisions in the greatest forums of globalisation.

4. Global organisations like the WTO, the IMF and the World Bank are undemocratic, and developing countries have little influence:

Trade policy is dictated by corporate interests. Undemocratic processes in the WTO: Secret negotiations (eg. TRIPS), "green room"meetings, limited participation in discussions.DCs do not have the resouces for lobbying activities or to analyse policy proposals in depth.IMF's programmes are all in DCs, but the institution is contolled by the advanced industrial countries, and only one country has effective veto power.

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5. WTO trade policies are unfair and hurt developing countries:

Trade agreements have left in place barriers in the north against the exports of the DCs, typically labour intensive goods like textile and agricultural produce, even as the DCs have opened up their markets to the goods of the industrialised countries.The intellectual property regime (TRIPS) makes drugs unaffordable to DCs, and this has negative implications for the combat of the AIDS pandemic.

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Rapid capital market liberalisation that has been forced on many DCs as a condition for their loans, has had many negative effects.Due to problems like corruption, weak financial institutions and lack of safety nets the countries were not ready for rapid liberalisation.Instability and unemployment have increased, and the debt burden is often enormous.

6. IMF policies have not been good for growth and hurt DCs:

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7. Globalization is empowering corporations at the expense of the nation state:

MNC are extremely powerful, and many MNCs are larger than nation states.Multinational companies exploits workers in countries with inferior labour standards.Small farmers and businesses in DCs have difficulties competing with the MNCs.

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8. Globalization is bad for the environment:

Rich countries export their polluting industry to poor countries which have less strict environmental standards. Processes of industrialisation are leading to global warming and a deterioration of the atmospheric quality. Developing countries have been excluded from the Kyoto Protocol, providing a loophole for transnational companies.Resource industries such as forestry, mining and fisheries exploit the resources of poor countries with little regard to either the long term cost to the country in terms of the loss of a national resource, or to the environment.