An important trend occurring in the world economy is the process of globalization. Globalization is the progressive integration between national economies and the breaking down of barriers between trade and financial flows around the world, which will eventually lead to the emergence of a single world market. Globalization has affected many different nations in different ways, depending on their degree of development and extent to which they are open to the flows of the world economy. China, which is one of the developing countries, is said to be the next economic super power.
Many guru economists such as Lawrence Summers predict that in the opening decades of the 21st century, china will match the US and Japanese economies. China currently ranks seventh strongest economy on a global scale. China’s economic success has not been confined to raw economic growth, especially with a huge trade surplus of over 40 billion according to world guide from 1998. China has an annual per capita Gross Domestic Product (GDP) of $750. Today China would have to be the most alluring country. Globalisation has many impacts on developing countries; these include growth, employment, poverty, women and finance. These will be assessed below.
It is striking that global GDP growth has been slower than in previous decades since 1990, the period in which globalization has been most pronounced. This contrasts with predictions of the growth-enhancing impact of globalization.
Growth is unevenly distributed among developing countries in the Asia – pacific region. In terms of per capita income growth, only 16 developing countries grew at more than 3 per cent per annum between 1985 and 2000. Some 55 developing countries grew at less than 2 per cent per annum, including 23 that suffered negative growth.
The income gap between the richest and poorest countries increased significantly. This uneven pattern of growth is shaping a new global economic geography
The most striking change is the rapid economic growth in China over the last two decades, together with a more gradual but significant improvement in the economic growth performance of India. These two countries together account for more than one- third of the world’s population.
The surges in growth means more consumers that need goods and services. These needs appear because of the increase in per capita income of developing countries. Basically, globalization in developing countries makes the need for more globalization.
ILO estimates that the unemployment has been increasing substantially over the last decade in the Asia – pacific region. Unemployment rates increased since 1990 in the developing countries of South-East Asia and East Asia.
Causes include the financial crisis (due to globalization) at the end of the 1990s. In some major countries, unemployment rates declined after the crisis but not to pre-crisis levels. Self-employment, which indicates the informal economy, increased in all developing regions, except for East and South-East Asia.
Employment performance was mixed in industrialized countries. Over the last decade unemployment increased in Japan but sharply declined in some European economies and UK.
Income inequality increased in some industrialized countries, while decreasing in developing countries. Earnings increased sharply of the top 1 per cent of income earners in the US, UK and Canada. In the United States, the share of this group reached 17 per cent of gross income in 2000, a level last seen in the 1920s.
Causes include high compensation paid by MNEs, the development of new businesses with a global reach.
It is an error to attribute all positive or negative outcomes to globalization. Domestic structural factors are also critical, including inequality in the income distribution and the quality of governance. The impact of globalization on poverty is difficult to assess. Most developing countries have seen greater income inequality but how far globalization can be blamed remains an open question.
The number of people living in absolute poverty worldwide has declined significantly from 1,237 million in 1990 to 1,100 million in 2000 but most of the improvement was in China and India, which house 38 per cent of the world’s population. In China alone the number of people living in poverty declined from 361 million to 204 million.
In the developing countries of Central Asia, poverty has increased by 8 million; globalization and regional factors were key factors.
While reduction is world poverty deserves celebration, it is of little consolation to those outside the few beneficiary countries. Real social costs may occur even if aggregate indicators of unemployment and poverty do not deteriorate. Those indicators may mask the increased” churning” in labor markets and movements in and out of poverty.
Perceptions of the social impacts of globalization are colored by direct experience of job or income losses, regardless of the overall picture. The mixed pictures of economic performance, employment, inequality and poverty make it extremely difficult to generalize about the impacts of globalization. Observed outcomes reflect the combined results of a complex of factors of which globalization, however broadly defined, is but one.
In the developing countries, the social cost of globalization has fallen disproportionately
on women. Many have been adversely affected both absolutely and in relation to men. For instance, trade liberalization has allowed the import of subsidized agricultural products and consumer goods that have wiped out the livelihoods of women producers.
The increased entry of foreign firms often displaces farming women from their land or out-competes them for raw materials essential to their productive activities. Women producers also face formidable barriers to entry into new economic activities generated by globalization. This is often because of biases, either against women directly or against the micro- and small enterprise sector in which they predominate.
For instance, women own less than 2 per cent of land worldwide and receive less than 10 per cent of credit. Women have also been more adversely affected than men during the increasing number of financial crises generated by globalization and more disadvantaged by cuts in social protection. For many other women with some education and skills, globalization has resulted in an improvement in their economic and social status. They include the millions of women workers absorbed into the global production system. This wage employment gave them higher incomes than in their previous situations, which were either poorness and unstableness in the existence of an informal economy. Wage employment also gave these women greater potential economic independence and often raised their social status within oppressive societies.
On capital account liberalization, agreement is emerging that growth benefits are small. The potential benefits of access to financial markets are often reduced or negated by instability in countries with poorly regulated financial systems.
The prominence of short-term speculative capital flows is a basic structural flaw in the system. Such flows do not contribute to productive investment and place constraints to development policy.
In some cases, financial openness has led to misallocation of resources and increased the real cost of capital. The misallocation arises when information failures lead foreign lenders to finance unsound investments. The real cost of capital increases when governments raise interest rates to maintain exchange rate stability.
Financial openness limits counter cyclical macro-economic policy because countries have to surrender independence over either exchange rate or economic policy. Maintaining a fixed exchange rate implies forgoing the freedom to fix domestic interest rates, while control over the latter can only be regained by allowing the exchange rate to float.
Globalization also affects public finances. In both developing and industrialized countries the average level of corporate tax fell. The top marginal tax rate on personal income declined in the vast majority of countries as well, both high- and low-income, often substantially. So basically, globalization affects finances.
Changes in tax rates do not necessarily reduce tax revenues since lower tax rates can also help to reduce tax evasion and increase production incentives. But tax systems may become less progressive and place more burden on labor, which is not mobile like companies and rich individuals.
General Motors Asia Pacific has assembly facilities and sales operations in 15 countries in the Asia Pacific region. Manufacturing and assembly operations are in Australia, China, Indonesia, India, Korea and Thailand. China, Thailand and India are few of the developing countries with General motors manufacturing factories within them. These factories offer substantial work opportunities to unemployed people, so it benefits unemployment rates.
Examples of other transnational corporations are Nike and McDonald’s; corporations like these contribute greatly to globalization in developing countries.
McDonald’s is one of the most criticized companies by antiglobalists who reproach corporation’s low wages, advertising practices, involvement in deforestation, harvesting of animals, and promotion of junk food and an unhealthy diet.
Nike is another company that is getting globalize and is also often the target of antiglobalists’ demonstrations. According to human rights activists, Nike factory workers in developing countries as in China are paid $1.25 a day while working eight to fifteen hours a day. Human rights activists argue that, Nike is undermining human dignity for a profit. You may survive on $1.25 a day, but you cannot live and maintain your dignity.
All of there criticisms contribute to globalization.
Developing countries have imposed a few ways to reduce/increase the impacts of globalisation. In a positive view, to increase the impacts, lets look at China, has a very large and growing population, and not all the people who live there are employed, so a TNC like General Motors will be urged by the country to build more factories as it fixes the problem of unemployment. Countries who are against globalisation have got laws and regulations, human rights against TNC’s – so people don’t be used as cheap labour like Nike and McDonalds have done, which was also mentioned above.
As seen above, there are negative and positive impacts of globalisation on developing countries. Transnational corporations also contribute to globalisation in both negative and positive ways. Countries do things in their power to increase the positive impacts and to decrease the negative impacts.
Courtney from Study Moose
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