Has Globalization Been a Force for Development or for Underdevelopment  Essay

  • Length: 8 pages
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  • Subject: Economics
  • Type: Essay
  • Paper: #85660502

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globalization been a force for development or for underdevelopment?

Globalization and Development: An Uneven Exchange

Globalization is the network of international flows of goods, services, money, information, ideas and people. It is the force that helped nations developed into economic powers, becoming players on the international stage. Globalization while an instrument of positive change in many regions of the world it has also contributed to escalating levels of income disparity, environmental degradation, the eroding of state power on the international stage and the increase in activity and sophistication of trans-national criminal organizations. This paper demonstrates how globalization and the promotion of specific economic policies is a boon to specific countries such as South Korea while other nations are increasingly marginalized. Weak nation-states are subject to the influence of non-state international actors such as trans-national corporations and criminal organizations. These external factors destabilize a nation's central government and its authority therefore hindering a country's development process.

Globalization Economic Policies

Developing nations seeking to reap the benefits of globalization require a metamorphosis of their economic policies. These nations need to industrialize in order to effectively participate in the world economy. Typically one can identify five main phases of industrial development: commodity export phase, and primary and secondary export-oriented industrialization, primary import-substituting industrialization (ISI) and secondary ISI [Gereffi 1989]. South Korea is one country the successfully implemented ISI and export-oriented strategies. South Korea already had a history of industrialization and liberal economic policies. Before the occupation Korea was mostly a poor agricultural society where private land ownership was not well established. The Japanese abolished the monarchy, commercialized agriculture, broadened exchange and established private ownership of land. The regime implemented a policy of industrialization which brought about urbanization. Seoul became a city of over one million people when at the beginning of the century it had less than 200,000 [Cumings 2005]. Japanese rule was the first to begin Korean industrialization.

After WWII, the Korean War began which also contributed to laying further foundations for South Korea's industrialization. During the Rhee administration, South Korea redistributed its land before and after the war and South Korea saw a massive increase in U.S. aid and the militarization of South Korea. The Land Reform bill helped industrialization in two fundamental ways. The leveling of incomes and wealth in the countryside provided the possibility of putting the agricultural sector through lower prices for agricultural output without causing famine [Cumings 2005]. The capital gained from land redistribution was invested in the manufacturing and commercial sectors of the economy. U.S. Aid played an important role in industrialization of South Korea. The U.S. gave almost $6 billion between 1945 and 1978. All of this economic aid provided South Korea with the foreign exchange to support rapid industrial expansion [Cumings 2005]. Foreign exchange is needed to buy equipment and the knowledge for production, raw materials and energy to fuel production. Essentially, U.S. Aid funded South Korea's industrial expansion and reconstruction after the Korean War. The Park Chung Hee military regime brought a new economic era for South Korea. His military government can be characterized as nationalistic with an economic goal of rapid development. The state did this by creating the Economic Planning Board and centralizing political power to Park's party so there would be no hindrances to their plan [Cumings 2005]. Therefore, the 1960's and 1970's saw incredible economic growth due to government policy in export-led growth and industrial diversification.

The emergence of globalization resulted in the increase of foreign direct investment (FDI). Growth had been mostly seen from the period of 1990-2003 where there was increase in equity investment, short-term and long-term loans and reinvested earnings [World Development Indicators 2003]. For instance, developed countries such as Japan had increased their FDI at least 4 times from the period of 1990-2003 while the U.S. had increased theirs threefold [World Development Indicators 2003]. In developing countries such as Brazil, its FDI had increased its FDI 23 times while China had their FDI increased 13 times [World Development Indicator 2003].

The tremendous changes propelled by globalization in the FDI of countries showed the level of success of globalization in integrating FDI as an important economic tool in countries whether developed or developing. Concurrently, the results of the FDI do not only reflect the success of globalization in terms of economic growth and numbers but rather, it also reflects in the political, economic and legal areas of countries. For instance, due to the prevalence of FDI, the quality of banking services and the access to technology of investors had been heightened in host countries [Bank for International Settlements 2004]. Monetary policies and legal protection for investors in order to encourage them to invest their capitals had also been instituted leading to the growth not only of FDI but also the mushrooming of domestic enterprises particularly small and medium enterprises due to the more favorable business condition that has resulted from it.

The success of globalization in FDI has not shown any slowdown- the prevalence of MNCs, TNCs, mergers and acquisitions and the provision for soft and hard investment in developing countries where wages are lower and the quality of products and services has not been compromised is continuing. To a significant extent, it can be considered that FDI has been successful not only in the quantity of investments made but also on the manner by which it had affected the host countries. FDI, it is argued, assists in the development of local suppliers and sales, provides Third World countries with technology so they can effectively compete with advanced countries, increases the capital stock in a country, and therefore the income of that country and FDI provides employment for laborers within the Third World [Kiely 1998]. Consequently, due to the bilateral interests between FDI and host-countries, conflicts had been minimal compared to that of trade where the complexity of tariffs is put into the center of negotiations. Hence, globalization is successful in providing an orderly means of FDI in order not only to aid in developing countries but also to increase the efficiency and profitability of MNCs and even of developed countries.

Problems Associated with Globalization

The relationship between TNCS and developing countries are a source of criticism. Since the majority of TNCS and MNCS originate from non-peripheral countries the involvement of these corporations in the Third World is seen as an extension of colonialism. Latin American industrialization was often initiated by transnational corporations or relied on the importation of expensive foreign technology [Kiely 1998]. East Asian industrializing economies were dependent on export markets, especially the import of technology to promote industrial growth [Kiely 1998]. Moreover, these technologies require large sums of capital that typically need large influxes of FDI which may create few jobs in labor intensive economies. Critics argue that FDI does not automatically entail an increase in income for a particular nation as capital outflow may exceed inflow and TNCs may transfer price [Kiely 1998]. TNCs create monopolies in domestic economies therefore not creating competition and greater efficiency. Even if TNCs do increase incomes in the Third World nations, this may lead to consumption of products deemed unhealthy by advanced nations, for example the Tobacco industry and its recent success in Africa. TNCs do not promote political stability in the Third World and may undermine the sovereignty of nation-states by promoting military coups or degrading the environment [Kiely 1998]. The problems associated with globalization are also seen in countries like China.

Rapid economic transformation and globalization are leading to what Shaoguang Wang (2000) called "distributive conflicts." Social groups and regions have benefited from globalization very unevenly. Distributive conflicts are politically significant since they have contributed to the rise of social protests in both rural areas and urban cities. Economic liberalization has also weakened the ethics of the state, resulting in a waning of the people's confidence in the government. While the Chinese state has played an extremely important role in pushing the process of economic transformation and globalization, it has also inadvertently created serious problems. The close links between the government and businesses have led to widespread corruption among party members and government officials. Many forms of official corruption are clearly associated with globalization.

Non-State Actors and Globalization

This idea of TNCs subverting national sovereignty is well documented. For example, during the late 90s, the Clinton administration imposed economic sanctions on Khartoum, a government that was hosting Islamist militant groups. American companies that imported gum arabic opposed the economic sanctions and asked for a pass to keep importing the substance. These companies, according to Napoleoni (2003), "depended on imports of gum arabic from Gum Arabic Co. Of Khartoum, a company controlled by Osama bin Laden, of which the Sudanese government held only a 30% stake. Sudan is the largest exporter of gum arabic and U.S. importers are its biggest buyers" [Napoleoni 2003]. Non-state actors working against the interests of the nation-state is now more commonplace than ever. These actors inhibit the development and progress of weaker periphery states.

Globalization serves as a…

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