Does globalization foster economic growth in developing countries?

¶ … globalization foster economic growth?

Globalization

Defining globalization

The term of globalization has been defined by numerous specialists under various forms. The most commonly used definition, which encompasses the most elements is considered to have been given by the Gale New Dictionary of the History of Ideas, which ascertains globalization as "information-society and knowledge economies, fueled by the forces of global market integration and the emergence and convergence of new information technologies."

Wikipedia Encyclopedia defines globalization as "an umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing independence, integration and interaction between people and companies in disparate locations."

Effects of globalization

In other words, globalization is the process of world wide cooperation between economies in order for participants to reach higher levels of development. The most burning question adherent to the process is whether or not globalization makes equal justice to all participants, be them highly developed, less developed or developing countries. Wikipedia specialists stated that the process has both positive as well as negative effects.

The positive effects are registered in the economical and social domain where globalization works "as an engine of commerce; one which brings an increased standard of living: prosperity to developing countries and further wealth to First World and Third World countries."

The negative effects of globalization are registered in the economic, social and ecology areas as the process works "as an engine of "corporate imperialism"; one which tramples over the human rights of developing countries, claims to bring prosperity, yet often simply amounts to plundering and profiteering. Negative effects include cultural assimilation via cultural imperialism, the export of artificial wants, and the destruction or inhibition of authentic local and global community, ecology and cultures."

Globalization fosters economic growth

Throughout globalization, world wide countries have been able to ease the transfer of human resources, commodities, technologies, financial resources and data. This movement, aside with numerous other consequences of globalization, have led to a significant economic growth. Among the direct consequences of internationalization that foster economic development are:

increase in international trade at a much faster rate than the growth in the world economy;

increase in international flow of capital including foreign direct investment;

creation of international agreements leading to organizations like WTO and economic cartels such as OPEC;

development of global financial systems;

increased role of international organizations such as WTO, WIPO, IMF that deal with international transactions; increase of economic practices like outsourcing and offshoring by multinational corporations."

Supporters of globalization, also known as pro-globalists, point out that even classic economist David Ricardo was in favor of globalization through his theory of compared advantages. Advocates believe that a combination of the two results in free trade which leads to "a more efficient allocation of resources, with all countries involved in the trade benefiting. In general, this leads to lower prices, more employment and higher output."

Economic growth is good for the poor"

The process of globalization has severe effects upon the less developed countries, especially on those ruled by communist regimes. As the process implies "new openings in free trade and numerous successful models of liberal economies and political systems worldwide," inhabitants of the LDC feel encouraged to become part of the process. In other words, seeing the successful outcomes of globalization, inhabitant of communist countries and less developed countries feel impelled to make more efforts in order for their country to reach higher levels of industrial, technological, political and sociological development, as well as register economic growth.

World wide economic growth is most beneficial for poor countries, especially those belonging to an international organization. Overall international economic growth implies increase in revenues and significant increase in the international organizations' fundings. Based on the rate of the economic development, the organizations would grant subsidies towards their poorer members. These subventions would aid the less developed country to improve their own national industry, technology, politics and economy.

Market liberalization

Creating a free international market is the most desired achievement of pro-globalists. This market would suffer minimal governmental interference and would only be regulated by fair competition and high quality of the products.

The consequences of creating a free market would be numerous among which are: increased international competition, decrease of retail prices, improved quality of the products on sale, improved quality of the services offered and grater attention placed on the customers' needs. Aside from these positive consequences, a free market would negatively affects small entrepreneurs in the meaning that most of them would not possess the necessary resources to compete with international producers and would end up in bankruptcy.

The problems of multinational corporations

One of the most severe issues regarding multinational companies and globalization refers to the processes of outsourcing and offshoring. These two terms are rather similar and imply that local producers chose to employ foreign contractors instead of national workers. By deciding to employ human resource from abroad, the producer directly contributes to an increase in the unemployment rate in his country and indirectly to economic decrease.

Among the most relevant reasons behind outsourcing are lower costs and better quality of the products and services. However, the impacts upon the outsourcer's country's are quite dramatic. In order to solve this situation, the international organizations should promote world wide, no boundaries, job opportunities. This way, all people would be able to work anywhere in the world without any political restrictions. But this could only be done if the renumeration systems would correspond in all, or at least the great majority of countries. Nowadays, such a situation seems like a utopia and the path towards achieving it is complex and unyielding, necessitating a large amount of time.

Conclusions

In a nutshell, the term globalization stands for international liberalization of all elements that define humanity from education or fashion to economy and politics. Internationalizing these elements has both negative as well as positive effects upon world countries.

The most relevant negative effect of globalization is the increased rate of unemployment due to outsourcing of jobs. This problem could be solved in the years to come by a complete liberalization on all markets, from product markets to workforce markets. However, today such a solution seems impossible and it will take several decades to implement.