Negative And Positive Impacts of Globalization On Developing And Developed Countries - Essay Example

?Negative and positive impacts of globalization on developing and developed countries Introduction Trends and transitions were characteristics of thetwentieth century and globalization is an example of witnessed transitions in the period. Globalization defines a worldwide network that connects and integrates different aspects, such as economies, business, and cultures, across the globe. It is majorly characterized by interdependence across territorial borders. This paper explores negative and positive effects of globalization on both developing and developed countries. Definitive characteristics of globalization The major characteristics of globalization is the developed global web that interconnects people and factors from different regions of the globe. The developed interconnectivity has bridged the formerly developed cross territorial barriers to allow for easy access to different regions. Developed communication networks and infrastructure that allow for economic, social, and political interactions have facilitated this and has further led to increased stakeholders in issues affecting regions. Economic integration through increased international trade, for example, induces foreign interest in a country’s economy while political integration through formed treaties generates political interest. Actual interaction among people across cultures, either directly or through communication networks also identifies cultural interactions and assimilations. Increased level of complexity in approaches to problem solutions is another identified characteristic of globalization. These features however have impacts, both positive and negative, on countries, depending on their level of development (Parker, 2005). Negative impacts of globalization on developing countries Developing nations are stakeholders in globalization but bear a number of negative impacts. The major source of the nations’ disadvantaged position in economic globalization is their areas of specialization. The nations have for example specialized in products with low values such as agricultural raw materials and low valued manufactured commodities. Further, developing countries specializes in a few external markets for their exports. Reliance on the lowly valued commodities identifies the first negative impact of globalization. This is because while the countries participate in international trade and allows for importation and exportation of commodities across their borders, the value of flow in the opposite directions is different. The countries export lowly valued products such as agricultural outputs at low costs to developed countries while they import highly valued finished industrial products at high costs. Globalization therefore induces a negative balance of trade on the developing countries, a factor that is reflected on the countries’ economic status (Simpson, 2007). Such has been the case in the Sub Saharan nations and their cities such as Lagos that rely on exportation of cheap commodities with limited bargaining power. Developing countries have also suffered from increased unemployment rates because o globalization with countries such as Nigeria and Kenya loosing as high as 30 percent opportunities to retrenchment (Oduwaye, 2006). The countries’ narrow market base for their exports identifies another negative effect of globalized trade. While most of the countries specialize in perishable agricultural commodities, their markets are narrowed to few countries, a factor that identifies high risks of market volatility. Economic instability in case of breached link between two economies therefore leads to loss in the value of commodities that cannot be stored for a long time. Such loses may also occur due to temporary diplomatic challenges and communication barriers. Declining trend in productivity of the countries’ exports has also worsened their trade deficits (Simpson, 2007). Developing countries have also failed to reap the full benefits of globalization especially with respect to capital transfer across territories. While industries from developing countries are ready to explore markets in the developing countries, they are reluctant to invest directly in the countries and instead export finished products. This identifies substitution of domestically produced commodities in the developed countries and industries, by imports. Consequently, productivity of developing countries decline with increase in unemployment rates and dependence on imports. Difference in production cost is a major factor. Firms from powerful developed countries are also likely to use political power to undermine authorities in developing countries (Gillespie, 2007). Positive impacts of globalization on developing countries Globalization however has a number of positive impacts on developing countries and their citizens. The countries are or example able to utilize commodities that they cannot domestically produce because of involved level of technology, production cost, and raw materials. This also identifies the benefits of improved living standards due to higher levels of utility. Globalization, through trade and political integrations, also promotes political stability in developed countries that still face challenges in democracy. Such integrations also register developments in technology and infrastructure and facilities investments from developed countries. Increased competitions by foreign firms also facilitate increased efficiency in local industries’ productivity towards economic development and consumers’ utility (Gillespie, 2007). Further, direct foreign investments increases employment opportunities in developing countries, as the case of West Africa such as Nigeria, while open labour market allows for exportation of labour to foreign markets (Oduwaye, 2006). Globalization has also facilitated economic growth of some countries like China (Bigman, 2007). Positive impacts of globalization on developed countries Developed countries have derived significant benefits from globalization, especially with respect to globalized trade. Specialization in fields of production has for example led to economic advantages towards higher revenues and living standards. Specialization for example allows for efficiencies and innovation towards cost effectiveness and development of diversified products for a wider market towards higher gross income. Globalization also avails cheap commodities in the developed countries to ensure affordability. Similarly, allowance for transfer of physical property, as has been the case in the United States’ industries has facilitated efficiencies in production processes (Lerman and Schmidt, n.d.). Mobility of intellectual property into developed countries also facilitates “technological developments and innovation” that can be applied for economic advantages (Carbaugh, 2010, p. 23). Most export industries also offer higher wage rate to their employees and this improves people’s economic and social status. Another benefit of globalization on developed countries is the freedom of movement of capital that allows their investors to explore countries whose interest rates are relatively lower than domestic rates (Cherunilam, 2008). Negative impacts of globalization on developed countries Like the developing countries, developed countries have also experienced both negative and positive effects of globalization. The most evident negative effect is job insecurity in which significant numbers of people have lost their jobs and others are not certain of their job security. There has also been a general trend in lower wages because of the internationally available cheap labour. Workers in developed countries are therefore forced to accept lower wages or risk losing their jobs to imported workforce or relocation of firms to other economies (Cherunilam, 2008). Multinational operation of firms from developed countries, in developing countries, also risks the firms’ corporate image as they may be reduced to operational standards in those countries and results from a branch in a developing country may adversely affect the international image of the firm (Carbugh, 2010). Similarly, foreign direct investments, as have been the case with “Citibank and Hewlett-Packard” of the United States, have led to reduced wage rates in their host countries due to availability of cheap international labour (Lerman and Schmidt, n.d., p. 1). Conclusion Globalization has largely interlinked different part of the world through economic, social, and political integration. This is associated with a level of interdependence and identifies many impacts, negative and positive, on both developed and developing countries. Works cited Bigman, D 2007, Globalization and the least developed countries: Potentials and pitfalls, CABI, Cambridge. Carbugh, R 2010, International economics, Cengage Learning, Mason. Cherunilam, F 2008, International economics, Tata McGraw-Hill Education, New Delhi. Gillespie, A 2007, Foundations of economics, Oxford University Press, New York. Lerman, R and Schmidt, S N.d., An overview of economic, social, and demographic trends affecting the US labour market, United States Department of Labour, viewed on November 29, 2012, < http://www.dol.gov/oasam/programs/history/herman/reports/futurework/conference/trends/trendsVI.htm#.ULbUdOSce84 >. Oduwaye, L 2006, Effects of globalization on cities in developing countries, Effects of globalization on cities in developing countries, University of Lagos, viewed November 29, 2012. . Parker, B 2005, Industrialization to globalization and business: Relationships and responsibilities, SAGE, Thousand Oaks. Simpson, R 2007, A comparative study of the impact of globalization on the development o Bangladesh and Tanzania, Victoria University, viewed November 26, 2012, . Read More