Globalization: A Panacea for World Economic Development?
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Globalization is a buzzword that has gained increasing importance all around the world. A very significant feature of the global economy is the integration of the emerging economies in world markets and the expansion of economic activities across state borders. Other dimensions include: the international movement of ideas, information, legal systems, organizations, people, cuisines, cultural exchanges, etc. But the movement of people, even in this age of globalization since the 1970's, is strictly regulated in many places in the aftermath of September 11, 2001.
More countries are now integrated into a global economic system in which trade and capital flow across borders with unprecedented energy. However, globalization has become painful, and rather controversial to the developing world. It has produced increasing economic interdependence through growing volume and a variety of cross-border flows of finance, investment, goods and services, and the rapid and widespread diffusion of technology. A World Bank study, Global Economic Prospects: Managing the Next Wave of Globalization succinctly discusses the advantages of globalization. Driven by the growth in global trade, since 1974 exports have doubled as a proportion of world economic output to over 25 percent, and on existing trends will rise to 34 percent by 2030. World income has doubled since 1980, and almost half a billion people have climbed out of poverty since 1990. As currently projected, the number of people living on under $1 a day will halved from today's one billion by 2030. This will result from growth in South and East Asia, whose share of the poor will be cut in half, from 60 percent, while Africa's share will rise from 30 percent to 55 percent. The scale, benefits, and criticism of globalization can all be exaggerated. On the contrary, compared to the immediate post-war period, the average rate of growth has steadily slowed down during the age of globalization — from 3.5 percent per annum in the 1960's to 2.1, 1.3, and 1.0 percent in the 1970's, 1980's, and 1990's respectively. The growing economic interdependence is highly asymmetrical, as the benefits of linking and the costs of delinking are not equally distributed. Industrialized countries (the European Union, Japan, and the United States) are highly interdependent in their relations with one another. The developing countries are on the other hand, are largely independent in economic relations with one another, and highly dependent on industrialized countries. Indeed, Globalization creates losers as well as winners, and entails risks as well as providing opportunities. An International Labor Organization (ILO) blue-ribbon panel noted in 2005 that the problems lie not in globalization per se but in the deficiencies in its governance. Some globalization observers have noted that there has been a growing divergence, not convergence, in income levels, both between countries and peoples. Inequality among and within nations has widened. Assets and incomes are more concentrated. Wage shares have fallen while profit shares have risen. Capital mobility alongside labor immobility has reduced the bargaining power of organized labor. The rise in unemployment and the accompanying casualization of the workforce, with more and more people working in the informal sector, has generated an excess supply of labor and depressed real wages. Thus globalization has spurred inequality, both in the wealthiest countries as well as the developing world. China and India compete globally, and yet only a fraction of their citizens prosper. Increasing inequality between rural and urban populations and between coastal and interior areas in China could have disastrous consequences in the event of a political transition. Forty of the poorest nations, many in Africa, have had zero growth during the past twenty years. Their governments followed advice from wealthy nations and World Bank consultants on issues ranging from privatization to development, but millions of people continue to suffer in poverty. Ironically, the wealthiest people benefit from the source of cheap labor. The policies of the West reinforce a growing divide between the rich and poor. Source: World Press More |
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