Globalization has, in my opinion, played a crucial role in integrating numerous national markets to form an interdependent global network of our countries. Consequently, countries engage in international trade with a wide range of unlimited products and services. Over the years (for approximately 30 years) I have experienced the impact of international trade as it grows and expands rapidly. Today, the rate of growth of the global trade is faster than the available output. According to the United Nations report (2008), the rate of growth has doubled within 10 years with the dollar value of global merchandise exports rising from US $ 7 trillion to US $ 14 trillion (Williamson 6).
Apart from financial liberalization and increasing capital among all participating countries that has sustained growth in third world countries, globalization has, in the long run contributed to the growth of the world economy and consequently, the reduction of poverty. Through significant dynamism, the world has realized the importance of division of labor and diversification in sustaining local economies.
Today, we realize the extent to which globalization influences economic growth and helps to eradicate poverty is neither definite nor clear. The unsolved debate focuses on the fact that the inequality ratio is constantly increasing worldwide with every step of economic growth as the poor remain poor. Some critics believe that economic growth is unequally distributed since the effects of poverty do not reduce proportionally to the growth rate of the economy (Acemoglu and James Robinson 323).
The role of globalization in fostering economic development
I have found that increased and unreserved interaction with the world market not only dictates the income distribution between countries but also within the countries. In my opinion, changes in poverty levels are directly associated and dependent on the changes in incomes on average and, therefore, easily predictable.
Free trade between unequal counties plays a major role in reducing inequality in countries depending on the timing and case specificity of the trade. Between 1995 and 2005, the developing countries encountered thrice an increase in their share up to US $ 4 trillion (Rivoli 16). This is also equal to 35% of the market share.
Dynamism of free trade
Dynamism and diversification is a result of changes in preferences of the consumers and most importantly, a steady and sustained rise in demand among the nations actively involved. The more actively a country is involved in diversification and dynamism, the better its export performance in the free market and its development and market share. Some dynamic sectors include; electronics and electrical products, clothing and textiles, vehicle spare-parts, beverages, energy-based products such as bio-fuels and services such as computer and information services.
The service sector includes education, cultural services, health-care, telecommunications, construction, business, and finance. Through creating employment and ensuring access to the basic services essential in any country, globalization creates competitive economy that is necessary for national economical growth (Rivoli 21).
Service economy generates more significant gain to the Gross Domestic Product (GDP) than a developing can realize through merely increasing the export of traditional primary commodities. The expansive and dynamic services provide great potential that fuels development of national economies especially in third world countries.
I think that the existing demographic and economic imbalances between the Northern and Southern divisions of the earth determine the persistent flow of migrants into developed countries in search for jobs and a reliable and sustainable income. The governments of developed countries have in the recent passed lessened their laws and enacted policies that allow foreigners to work temporarily within their borders. For instance, the United Kingdom reduced the requirements for acquiring a work permit and acceptance once strictly out-of-bounds to foreigners occupations. Other countries such as Germany and the United States funded the ‘green card’ programs that allowed hundreds of foreigners to acquire employment status as well citizenship into these countries.
Developed countries are keen on regulating the free movement of labor which, to my opinion is self-centered as they focus on their benefits of cheap labor. However, they acknowledge the importance of labor integration as a component of availing merchandise. The movement of labor also ensures the sharing of entrepreneurial skills and most importantly, the trending information technology-related trade.
Public awareness on the need to preserve the environment
Through sharing information, products, and labor movement, the process of globalization has enabled the public to show concern for preserving and protecting the environment worldwide. The rapid rise in trade and industrialization magnifies the effects of an unhygienic and deteriorating environment as our habitat. There is therefore, a rising general concern and
Recognition for global environmental stability and equality to reduce poverty as efforts to realize logical world development (Rivoli 21
Globalization as an agent of slow development
The unfair inequality between countries renders the divergence irrelevant since it does not offer fair play (benefits and treatment) for small third world countries as compared to the developed countries, which also control the markets (Milanovic 44). Since our income depends on our citizenship and our countries of origin, I think that the people do not have fair chances at trade and life in general (Milanovic 40). citizenship is therefore, a rent regardless of one’s freedoms and rights. For example, citizenship by birth imprisons one to the opportunities only available in their country despite how meager or insufficient. Only a few people can afford purchasing legal citizenship and create a chance to improve their lives by achieving a wide range of opportunities especially in developed countries. For instance, Milanovic notes that a passport of the United Kingdom can be attained illegally at only US $ 6,000 yet a legal one is not less than US $ 1 million.
Milanovic (45) notes that increasing in the development of prosperity from globalization is only helpful to a certain point which when crossed, becomes harmful. Milanovic insists that it is not wise to rely on acquiring unlimited wealth as the way to create a stable society. The endless efforts of every country seeking to improve their development becomes meaningless at some point, he notes.
Global optimum distribution of income is, according to Milanovic, the total optimal income distributions of a country.
Since the early industrialization period in England, the poor were marginalized (Acemolgu and Robinson 46). The poor had no chance to prosper or benefit from the loans and pension programs as did the rich. Thomas Edison later adopted the same system that discriminates and marginalizes a group of people in the society completely downing their hopes of ever catching up with the rest of the community (Acemolgu and Robinson 48).
In the book Why nations Fail, Acemolgu and Robinson (467) show how Napoleon Bonaparte’s government failed as it was opposed by the subjects who were completely dissatisfied by the high ratio of gap between the rich and the poor in society. The trend spread from France, Spain to Mexico causing harm and tragedy to large parts of the populations. In the United States, they note, the constitution which was enacted during the conservative period did not consider the modern critical way of values and had to undergo numerous amendments to become effective and efficient today.
Factors hindering development
High energy prices
Oil prices are steadily and consistently increasing over the years. For 10 years now developing countries that are fuel-importing nations are at the mercy of the oil producers. This dependence leads to political interferences and pressure. Over the years, the demand for oil as a commercial fuel has increased greatly in developing countries especially with increasing industrialization and infrastructure. These countries end up experiencing inflation in their economies.
In the long run the rising oil prices interfere with the government programs dependent on government funding such as poverty eradication. As these governments divert the finances allocated for these programs into covering for the coveted fuel, they end up in huge debts as they try to subsidize and balance their budgets.
Some of the developed countries are fond of abusing intellectual property rights since they have an upper hand and advantage in the benefits of the free trade. Since they offer more of their resources, they reinforce policies and high tariffs with an aim of controlling the markets. International cartels strive to fix prices with an aim of preventing competition by allocating markets. Without adequate policies and effective laws in place, countries may suffer loses and unfair deals in the free market.
Policies for price transmission mechanisms
Trade policies affect the final price of household goods considering all factors such as the cost of production and transportation, profits and returns to capital. In the long run, the policy affects income distribution and, consequently, the level of national poverty. Each country has unique framework of regulatory laws that govern international trade and imports. These laws create the difference of the impact of trade policies on the end consumers of the country. Countries with lessened laws suffer the consequences of citizens exposed to the impact of the trade policies.
The impact of trade policies also depend on a consumer’s frequency and dependence on the product they choose in the free market. Each consumer will feel the impact of fluctuations on food prices in accordance to the changes in their income, which are inter-related. Economic shocks either offer positive or negative to the consumers therefore creating the unpredictability of acceleration of free trade (Williamson 4).
Although trade fuels dynamism and diversification of sectors that leads to the growth of the informal sector, it does not guarantee productivity of the sector. For example, a steady and significant growth in the informal sector in Tanzania due to the availability of exports and export related services failed to improve the productivity of the sector. The structural adjustment was marred with that lack of inter-sectoral interactions and collaborative links. Ultimately the situation led to the dropping of prices of goods especially those financed by foreign aid. This drop in prices in turn reduces the unit-labor cost.
I acknowledge the fact that globalization has today enhanced the integration of national markets and liberalism of countries especially the third world countries to realize interdependence and consistent growth in their economies. Through easing on tariffs and other barriers to trade and allowing agreements to foster foreign direct investment, in my opinion, free trade has raised the economies of countries significantly. Other factors include autonomous unilateral policy reforms, advancement in information technology-related services and the telecommunications industry. These factors have helped most developing countries to benefit from the integration into the global economy brought by globalization.
According to most of the authors, free trade and globalization has played a crucial role in integrating numerous national markets to form an interdependent global network of our countries ensuring the balance in competition and sharing of resources and products freely throughout the globe. I believe that the fruits of globalization surpass the cost and negative effects it brings.
Branko Milanovic., The Haves and the Have-Nots. Basic Books. 2012
Daron Acemoglu & James Robinson, Why Nations Fail. Crown Publishers… 2012
John Williamson, A short history of the Washington consensus.
Petra Rivoli., The Travels of a T-Shirt in the Global Economy. Wiley. 2009
World Bank, “The East Asian Miracle”
- Reading: Wade, “Introduction”
- Optional reading: Rodrick, “Getting interventions right”
- Reading Mahoney, “Explaining levels of colonialism and postcolonial development”
- Optional reading: Lange et al, “Colonialism and Development”
- Reading: Moran, “Foreign Direct Investment in Low-Wage, Low-Skill Activities;”
- Reading Lee, “Chinese Workers’ Contentious Transition from State Socialism”
- Reading: Seidman, Beyond the Boycott, chapters 1 and 4;
- Reading: Sachs, The End of Poverty, chapters 12-14