Globalization and Inequality in Developing Nations - Research Paper Example

Raneem Abuaziz John Kirby English 102- 7D8 August 3 Globalization and Inequality in Developing Nations Globalization, as an integral aspectof the gradual incorporation of the global economy, became realized through the progressive synthesis of different nation states’ finance and trading platforms; reaching unprecedented levels in the current arena. Ultimately, the Post-World War era has witnessed the great influences (both positive and negative) of globalization, which have inevitably characterized human growth, development and overall sustainability. This vibrant wave of global integration has and continues resulting in varied and far-reaching consequences, especially concerning the economic well-being of global populations as citizens of their respective legal jurisdictions. It is hence majorly the reason why, there has and continues to exist active public debate. This research paper will investigate whether the effects of globalization both positive and negative increased inequality in developing nations? The argument raised in this paper will utilize Hermann’s definition of globalization that is, “a conceptualized modern phenomena involving the breakdown of borders, the emergence of new technologies and a mix of different cultures” (Hermann 1). The global inequality across countries is already high and rising. For instance, the US, Japan and the European region are many times richer than developing countries such as Ethiopia and Haiti. There has also been growth in countries developing countries for instance China meaning some countries grow while others remain the same. Of more importance is the fact that in many developing nations, inequality has been growing over years and one aspect that has brought about the inequality is globalization. As Yusuf portrays, the impact of globalization has affected different aspects in developing nations including labor markets, inflation rates, external trade imbalances and prevailing business cycle spillovers. Of importance, is the paper’s discussion, on the inequality that has developed over time, majorly influencing the distribution of income within various state entities. Up to the 1990s, most developing nations were constrained by issues such as barriers to trade and investment, liberalization of trade and closed markets and barriers to competition in business. However, globalization has progressively changed these aspects thereby introducing a new view and ways of governance, conducting business and living. It has been argued that gradually, globalization leads to a rising tide of income for particular groups in developing nations thereby creating ineqaulity (Yusuf 32). Opponents of globalization on the other hand, argue that while the aspect does improve overall income standards (in the eventual long run); such benefits are however not shared equitably, amongst a nation’s citizenry population (Yusuf 34). Moreover, they are concerned with the fact that widening income disparities, do not only raise both social and welfare concerns, but that they also do limit the pertinent drivers of growth and industry. This is informed by the fact that the various opportunities created by the process, may not necessarily become fully exploited especially by the low-income earning bracket (Yusuf 36). Thus ultimately, they envisage the sustainability of the process (globalization), being adversely affected by the rising standards of inequality. This is despite its dependence on the maintenance of broader support across not only state, but also global populations (Yusuf 37). This is perhaps the main reason why there continues to exist, continuous heated debate, on the need and importance of the process to human development. Without doubt, the process of globalization has benefited mankind and at the same time brought a cost to overall social contexts through inequalities. Thus, there is need for appreciation, as well as discussion on the ‘negative’ effects present as a result of the process. Yusuf clearly points out that developing countries tend to ignore the services that account for a fifth of total trade in 1999. This affected major subsectors in the manufacturing sector that rely on efficiency of services such as marketing, advertising to ensure that they score high rates of growth and export earnings (Yusuf 10). As such, this has increased the inequalities between developing nations and developed nations in terms of growth and earnings meaning that most people in developing nations remain poor. Hence, this potentially has the capacity to generate substantial conflict based on income and wealth distribution, thus little surprise expressed, with the eventual entry of many a developing nation; into the global market. Goldberg and Nina state that the ideal measure of inequality would be based on comparisons of the wellbeing of individuals over their entire lifetime and the relevant aspect to use in this measure is consumption. The authors’ findings indicate that measuring inequality based on income as a factor in developing countries has been difficult because households with high incomes tend to under-report their incomes while the households with low incomes over-report them. Exposure to the effects of globalization by developing nations has resulted in a sort of ‘parallel evolution’ of inequity; in different measures from income standards and wealth distribution, to social welfare levels and state governance capacity (Goldberg and Nina 2). Core to this has been the dual effect of the globalization aspect, both of which have influenced overall measurement standards and levels of global equity measures. First, is the aspect of various developing nations’ exposure to international markets, in terms of capital flows (Foreign Direct Investment), exports and/ or imports to their GDPs, fluctuations of exchange rates, and trade protection; which have substantially increased in the current era. however, is the fact that while the aforementioned is positively embraced, the prevailing contexts of inequality; as categorized by different standardization measures, portray a scenario of increasing inequity. This has in some instances been quite severe, as was experienced during the 1990s in such nations such as Argentina and pre-NAFTA Mexico amongst others. The statistical evidence of other nations such as those in Africa was less different, given the prevailing imbalances that were experienced. For many nations, such as India (early 1990s) and Latin America during the 1980s, the effects of trade liberalization are a representation of globalization’s influence on further expansion of market arenas (Goldberg and Nina ). Globalization has also brought about gradual reduction of trade barriers as envisaged through different WTO (World Trade Organization) policy measures, as means of ‘opening up’ trade. However, it is on this measure that opponents base their claim of the globalization process resulting in negative effects; with changes in income or wealth inequity being linked to enhanced trade ‘openness.’ By the turn of the century, the economic landscape had undergone further dynamic changes. Other factors aside from trade liberalization i.e. increased FDI and capital flows, immigration and state exposure to fluctuations of global exchange rates, further influenced the effects of globalization (Goldberg and Nina 14). These factors soon became influential in the developing world’s integration into the global economy further influencing the nature of equity vis-à-vis inequity in the international arena. The process of globalization gained momentum as the state-nation, shifted its view of sovereign power and capacity from the military and geo-political influence angles, to the market economy. The latter, relied heavily on both private resources and capital, hence the need for public-private partnerships, in the subsequent development of nations. As a result, a novel process of structural (re-)adjustment became necessary, especially in streamlining the economies of various stakeholders as influenced by subsequent effects of globalization (Herrmann 4). Consequently, these international organizations amongst others, became established in different developing nations, with the aim of tapping the existing resources. This was in terms of raw materials, the present market arena, as well as cheap labor and less taxation measures. Investment was thus concentrated in expanding the utility of private capital, which subsequently increased as trade became established between the industrial nations, and the developing world (Herrmann 8). new opportunities became realized, especially for the developing nations, in terms of increased FDI, capital inflow, increased capacities in terms of science and technology, and their exposure to other markets; abate at a lesser degree as compared to the developed nations. Proponents of the process, envisage such positive progress could not be realized without globalization, further showcasing the positive impacts gained in sectors of society such as: education, tourism, communication, industry and in the overall sense, the market economies present. Through further expansion of prevailing empirical work, inclusion of amongst others: intermediate products trade, firm heterogeneity, short-run immobility factor, global capital flow and skill-based, trade-induced technological changes, have further enabled better analysis of the process of globalization. Depending on these amongst other factors, the effects of globalization can be advanced as being more positive in terms of overall influences based on the ideals that prevail at a given period (Lee and Marco 170). Proponents aver that the effect of globalization on existing inequality scales is dependent on varying factors, which are both time- and country-specific. This is inclusive of amongst others: a nation’s trade protection pattern (prior to the liberalization process), the specific type of liberalization, industry sectors affected, the presence or absence of other crucial concurrent trends, and domestic market flexibility towards adjusting to changes present (Lee and Marco 172). In citing these factors, they are of the view that globalization as a process was and still continues being of positive importance to the global society. It is upon this influence that various economies have been positive influenced, in terms of choice variety of goods/ products and services, greater market arenas (Lee and Marco 173). As Lee and Marco argue, “Absolute poverty has increased in many DCs and relative poverty has increased in the majority of countries” (Lee and Marco 168). This is a result of globalization despite the fact that optimists believe this should not be the case because to them globalization increases trade and enables economic growth (Lee and Marco 168). The net effect of this was that the developing nations became more critical partners, not in terms of their positive gains accrued as a result of globalized economy, but rather as important market arenas, as well as net-producers of raw materials. This scenario reflects the inequalities that developing countries face. As a result of this and other influences i.e. IMF, World Bank and WTO measures, trade imbalances resulted in inequities which sharply divided the industrial (rich) nations from the rest of the global society (Lee and Marco 176). majorly so, was the effect of wealth and income distribution, which varied sharply not only between the industrial and developing nations, but also within populations present in these jurisdictions. The negative impact was witnessed more in the developing world, due to the lack of proper ‘insulation’ measures such as a robust social welfare system (Lee and Marco 178). Conclusion Undoubtedly, globalization as a critical factor of change has and will continue being of influence to the international arena. the need for greater integration of the global economy necessitates different measures, requisite in not only mitigating, but further alleviating the prevailing inequality experienced. Recommendations would be primarily focused on the policy making and implementation capacity of global organizations, influential in international trade and commerce. Through this, other measures can be implemented, specifically tailored to prevailing contexts within individual nation-states, as well as regional blocs. Accordingly, I reaffirm my opinion that globalization as a factor of integration, is necessary for future development and integration of society; where positive influences can outweigh the resultant negative effects. Works cited Goldberg, Pinelopi Koujianou, and Nina Pavcnik. Distributional effects of globalization in developing countries. (No. w12885). National bureau of economic research, 2007. Print. Herrmann, Andrea. Globalization and its Effect on International Business. 2013. Print. Lee, Eddy, and Marco Vivarelli. "The social impact of globalization in the developing countries." International Labour Review 145.3 (2006): 167-184. Electronic. Yusuf, Shahid. Globalization and the challenge for developing countries. (Vol. 2618). World Bank Publications, 2001. Print. Read More