Globalization: Facts and Figures - Term Paper Example

Globalization: Facts and Figures Introduction Developing economies are impacted by various factors; one of the factors that have impacted almost all developed economies in both positive and negative manner is globalization. Certain economists believe that globalization impacts governments and nations only in a negative manner, on the other hand other economists have a completely positive view of globalization, certain economists have come to agree that the way a nation experiences globalization and its challenges determines whether globalization will have a negative or positive impact on the nation. A major example of the impact of globalization is the recent integration n of capital markets throughout the world. Globalization is not a new theory, people before us were quite aware about its existence, but in recent years, globalization has spread at a faster pace and its affects have intensified. The steady increase in the exchange of capital between nations is one of the examples of high intensity of globalization in world capital markets. Globalization offers a huge range of opportunities to developing nations to increase their economic standards and standard of living by avoiding the possible risks associated with the entire process. In this writing the focus will be on defining what exactly globalization is, how it has been affecting developing nations such as Africa and the benefits and issues it has to offer to these nations. Body Globalization refers to the decrease or eradication of borders between different nations and increase in the amount of transfers of information and resources between countries. In other words globalization is the process of combing different countries together and making them as one. Globalization takes place when trade and transfer of information and resources takes place between two or more countries; trade that takes place between two or more nations is recognized as International trade. Certain theorists believe that globalization cannot take place if regionalization exists and others have stated that regionalization is not a barrier in globalization, rather it is the foundation of globalization. According to Caltiz, regionalization enables companies in different regions to grow large and to face the competition in the international market (Calitz 2000). For example: if small businesses located in regions support each other and integrate, they can grow into huge companies and be a part of the international trade competition and compete globally. As regional companies gain strength and become more capital intensive and start competing in international markets, globalization takes place and the borders created due to regions come to an end. Theorists such as Fourie believe that in certain situations a huge regional company may fail to complete in the global market, if the fail to compete, then they return back to competing regionally (Fourie 1998). Increase in the intensity of Globalization led to the development of the economies of developing nations and these developments decreased the income difference between the people of developed and developing nations. These benefits of globalization were availed by few developing nations, a huge chunk of the developing nations are still experiencing low economic growth and the difference between the income of these developing nations and developed nations is very huge. These countries are expected to face more problems both financially and socially if they continue without being a part of the international trading world. Hak-Min has a contradictory view point, the theorist states that globalization has not decreased the amount of difference in income distribution and only led to the growth of the industries of few of the developed nations (Kim 1999). He supported his opinion by stating that the total financial transactions that took place globally were majorly conducted by only 25 nations out of a total of 121 nations and only 1% of these transactions included nations which were in their developing phase. Hak-Min’s research clearly indicates that the benefits of globalization were mostly absorbed by developed nations and developing nation received a very small portion of the advantage. Researchers have proved that the difference between the income distribution of developed and developing nations have increased tremendously, rather than decreasing. According to a report created by IMF, the 90% percentage of the population of the entire world is situated in 42 nations (Adams 1998). The report even stated that production levels in all countries have increased dramatically but along with increase in productivity, the income difference has even increased as witnessed during the 20th century. According to Todaro, the growth rate of GDP in developed nations was 3.1% per year and developing nations only experienced a growth rate of 1.1% GDP growth rate per year during 1960s to 1980s (Todaro 1985). IMF’s report even showed that the rich nations have experienced improvement in economy by six times where as the developing nations only experienced a growth rate of 3% during 1900s to 2000s(Köhler 2000). Masson has contradictory view of the report of IMP and the statements of Todaro, he states that only thirty countries open mindedly took part in globalization during 1960s to 1980s and these countries experienced a growth rate of almost 4% in the 1980s and 5% in the 1990s (Masson 2001). Those that did not take part in globalization or limited their participation experienced low growth before the periods of 80s and did not face any growth after the period of 90s. He concluded that the percentage of benefit received by a particular country depends on participation, and not on how developed a country is. Globalization has a major impact on the employment of both developed and developing nations, theorists believe that globalization is one of the reason of higher rate of unemployment in developing nations. Certain theorists believe that developed nations can seek advantage of high rate of unemployment in developing nations and they can outsource their jobs to the labor market of developing nations which will benefit both the developed nations as well as developing nations. The unemployed sector will gain employment through outsourced work and the developed nations will benefit from low wages demanded by the labor society of developing nations. On the other hand, globalization has led to major advancements in technology and people who do not have the ability to operate these technologies will face unemployment and those who have the desired ability will gain employment from outsourced jobs. Due to this scenario, the low skilled workers will be persuaded to gain learning and training so they can work along with advancement in technologies and save their jobs. On the other hand, certain theorists believe that developed countries might face a disadvantage and people in developed nations might experience unemployment. This is because workers in developed nations charge higher wages and companies in developed nations will not prefer workers of their own nations and would rather hire employees from developing nations to decrease their costs. This clearly shows that employees of countries that are ready to accept lower wages will benefit from the process of globalization, while on the other hand, those who become inflexible will only loose from the process. Conclusion Globalization has been said to be of great advantage to those countries that have actively participated in the process and have redeemed the beneficial offerings of it, on the other hand countries that fail to seize the advantages offered by globalization and those who do not participate open mindedly will experience losses from it. Countries that have failed to realize the benefits, will in future realize that their failure to participate have further pushed their economy downwards and to catch up with the developed nations, these economies will have to work very hard. Works Cited Adams, Charles F, Donald J. Mathieson, Garry J. Schinasi, and Bankim Chadha. International Capital Markets: Developments, Prospects, and Key Policy Issues. Washington, DC: International Monetary Fund, 1998. Print.s Calitz, E. "Fiscal Implications of the Economic Globalisation of South Africa." South African Journal of Economics : the Quarterly Journal of the Economic Society of South Africa : Die Kwartaalblad Van Die Ekonomiese Vereniging Van Suid-Afrika. 68.4 (2000): 564-606. Print. Fourie, Pieter, and Villiers R. De. South Africa and the Non-Aligned Movement in an Era of Regionalisation and Globalisation: Proceedings of a Preparatory Workshop Jointly Organised by the Foundation for Global Dialogue and the South African Department of Foreign Affairs, Pretoria, 29-30 April 1998. Braamfontein, South Africa: The Foundation, 1998. Print. Kim, Hak-Min. Globalization of International Financial Markets: Causes and Consequences. Aldershot [etc.: Ashgate, 1999. Print. Köhler, Horst. Report of the Managing Director to the International Monetary and Financial Committee on Progress in Strengthening the Architecture of the International Financial System and Reform of the Imf. Washington, D.C.?: International Monetary Fund, 2000. Internet resource. Masson, Paul R. Globalization: Facts and Figures. Washington, D.C.: International Monetary Fund, Research Dept, 2001. Print. Todaro, Michael P. Economic Development in the Third World. New York: Longman, 1985. Print. Read More