Is Development Best Achieved by Being For, or Against, Globalization - Literature review Example

IS DEVELOPMENT BEST ACHIEVED BY BEING FOR, OR AGAINST, GLOBALIZATION? Department Introduction Globalization refers to the process of increasing influence exerted at the international, local and national levels by economic, political, financial, cultural and environmental processes that are global in nature.Development are the efforts that are geared towards improving the economic wellbeing as well as improve quality of life for the local and nationals by creating jobs, growing income as well as the tax base. Development is depended majorly on the structural changes, technological possibilities, increased production and reduced production costs, national governance and social wellbeing. It is therefore important to note that development is not only measured in the context of economic growth but must also include other aspects such as wellbeing and improvements in the lives of individuals. As stated by Held & Kaya(2008 p.21), a true development is one that seeks to turn around the lives of people and not merely increase their economic wealth. Globalization results into the interconnectedness of different business activities which has called for the global alliance as well as reliance in respect to politics, economy, trade and culture. Developments in the fields of communication technology, has created global economic village and broken the economic, social, political and cultural barriers. This liberalization has resulted into competition due to increased market for goods and services. While globalization create immense of opportunities for growth for both developing and developed nations, these opportunities are often accompanied by threats and other inequalities that limit the development in developing countries. Uptake or opening up for the forces of globalization therefore increases vulnerability of a country to these threats which do not balance with the opportunities. The following discussion supports the argument that globalization is not good for development mainly because such liberalization limits the ability of the national institutions to manageDemocracy and Governance, trade, migration, finance & aid and Foreign Direct Investment (FDI). The point here is: being against globalization ensures that national institutions are strengthened and policies are formulated based on the national ideals of a country. Due to the inherent weak institutions associated with the poor, increasing economic integration by actively participating in global economy results into even weaker institutions that cannot support development. Development in the Age of Globalization Democracy and Governance Being against globalization means reducing the influence of the powerful west on political decisions thus maintains country sovereignty. Globalization has the tendency of reducing the scope of democracy by rearranging the social classes through the creation of a capitalist class that is more dominant to the rest (Bush, 2007 p.190). The impact of this can be reduced by not integrating to the global economy. In this regard, being against integration ensures that the scope of decision making remains with the people and influence from the capitalist are reduced. In the developing countries and low income countries where this phenomenon is common, there are increasing problems of economic and social inequality. As stated by Howard-Hassmann(2010, p.19), being against globalizationensures that the state is not disengaged from economic activities thus the both the national political as well as economic authority of the country remains with the people. In this regard, low income nation’s foreign policy decision making is based upon political concerns rather than economic considerations. This is the only way to deal with violation of human rights and protection of the political interest of the developing nations. As stated by (Rodrik, 1997 p.5), development is achieved when the democratic forces and the state are in control of the decision they make and the decisions are made with the interest of the country’s development at hand. Reducing economic integration with the countries in the west is important in reducing globalized dependency. As stated by Schirm(2007 p.167), many developing countries’ growing dependency on west is a clear indication of patronage created by globalization. This trend has a negative impact on development of democracy and good governance. While the donor funds for under developed nations are for development and improvement of the living standards of the people, it sometimes leads to overdependence. The idea here is that the developing countries need to strengthen their own institutions and put restrictive measures to prevent the threats pose by integration. Economic as well as political institutions must be strengthening through national policies that give the power and authority to the citizens. As stated by Howard-Hassmann(2010 p.20), reducing uptake of global integration reduces insecurity, poverty, inequality which is violates human rights for millions of people living in low income nations. A good example can be seen in most countries in Africa where poverty has created long time wars e.g. Somalia, Congo, Nigeria, Sudan, Liberia, Mali and chard all in which conflict results from resources and due to weak institutions, the war escalate to civil and there is massive violations of human rights Globalization and Free Trade The globalization has created global markets thus create ample opportunities for many nations to fully integrate themselves into the world economy. The liberalization of the international market coupled by the effort to strengthen international rules and regulations such as dispute settlement mechanisms of the world trade organization (WTO) is expected to be a promising avenue for both developed and the developing nations’ development since it is expected to create equal opportunities for the weak and the poor. Being against globalization ensures protection from cheap goods and services that are likely to bring unfair competition. As stated by Schirm(2007 p.168), there is increasing protectionist practices dominating in the world today against the spirit of liberalization. Being against globalization ensures that the developing countries are able to align their policies within national mechanisms hence put restrictions to the influence of multinationals. According toJaumotte et al (2013 p.275), by developing strong domestic institutions, nations will be able to reduce reliance on foreign capital thus will be able to increase locally financed investments thus drive the need to increase both the public and private savings. Figure 1: Percent Export of agricultural Products per region Source: (United Nations Conference on Trade and, Development, 2004 P.75) Goldin & Reinert(2012 p.45) states that when goods or services are produced by the producer with the lowest costs, producers in the less competitive economies will no longer make profits due to low prices. As shown in the figure 1 above, agricultural exports from the developing countries continue to fall while those from developed countries continue to rise despite the fact that most developing countries especially Africa depends on Agricultural products for their economy. Figure 2: Percent Share of Fuel Exports Source (United Nations Conference on Trade and, Development, 2008 p.75) Goldin & Reinert(2012 p.70), warns that free trade may persuade the government in certain countries to participate in “race to bottom” with regard to the workers’ rights and environmental safeguards just to attract foreign investments that result from concentrating productions. In this respect, being against globalization ensures that decision making lie within the people but not with the international players thus protecting the country against the forces of inequality.As stated by Stulz(2009 p.281), If we are not able to make our own decisions them we would not be able to influence our preferences. Strengthening local institutions and protecting them from the influence of multinationals ensures efficiencies in the market. Porter & Vernon (201 p.200 studied America and Europe and concluded that America earned more wealth than Europe.This level of competition is dangerous for the local firms and can only be managed by the developing countries not subjecting to that environment. A study by World Bank shows that the commodity exports have been very low for the developing countries across the whole world (United Nations, 2004 p.29). The study observed that the commodity exports across the world increased by an average of 7.2% from the year 1966 up to the year 2000 while that from the least developed and the developing nations increased by 2.2% and 6.8% respectively (Beck et al 2013 p.115). As stated by United Nations Conference on Trade and, Development (2004 p.29), attempts by the least developed countries to shift away from dependence on commodity is futile because of the frustrate trade barriers and biased rules against agricultural products which form their main export. Being against globalization ensures protection of the local market by developing the local markets for goods and services. Globalized Finance Being against globalization ensures microeconomic policies are formulated on the basis of domestic interest and not international interest. While the development of global finance has resulted into the stimulating growth through mobilization of finances globally, many developing countries have not benefited. According to Kçay (2011 p.7), the relationship between the microeconomic policies and the financial globalization creates a considerable tension because most of the microeconomic policies are formulated on the basis of domestic interests. In this respect, the governments in certain developing countries ore subjected to uncertainty originating from the more developed nations thus they are not capable of influencing the global market (Held & Kaya, 2007 p.135).Focusing on domestic policies ensures that microeconomic policies are controlled and managed at the interest of the citizens. This will ensure improved market efficiencies. Figure 3: Total External Debts for Developing Countries in Billion US $ Source (United Nations Conference on Trade and, Development, 2004 p.29) Underdeveloped nations have been the greatest recipients of these funds with imposed high and outrageous interests’ rates pitting the nationals to go through hardships (Held & Kaya, 2007 p.137). Moreover, the actions of these institutions such as austerity measures including structural adjustment programs (SAP) on low income nations have only served to worsen the situation. While these programs are mainly intended to open up the markets for developing countries, these programs are often accompanied by deregulation, price controls, currency devaluation and cuts in government spending. Being against globalization ensures non dependency on economic governance by poor countries. A good example is a country like Uganda that depends on 50% of its revenue from donors. It is important for a country like this to focus on domestic investment, encourage people to save and depend more on its own generated revenue. Financial instability demonstrates clearly the manifestation as well and the impact of the progressive asymmetry between the international market forces and inadequate economic governance. According to Goldin& Reinert(2012 p.85), financial instability has called for higher technological advancements and knowledge requirements. It is therefore important to develop local institutions in order to widen the availability of the knowledge and technologies to domestic enterprises, social groups or countries and avoid marginalization of those countries or social groups who are not fully prepared. Foreign Direct Investments (FDI) Globalization has resulted into the growth in Foreign Direct Investments (FDI). FDI improves income and employments in the less developed countries thus result into increased GDP. However, the low income countries need to strengthen local investments mainly for development in the long term and acquisition in technology and education.As stated by Goldin & Reinert (2012 p. 85), the period between 1980s and 1990s recorded the biggest growth in FDI in the developing countries. According to Sally & Sally(2008 p.22), the growth of income per capita among sixteen developing countries in Africa and Asia grew by 3% during the revolutionary period between 1980s and 2000s. This study also showed that the gap between the rich and the poor and income disparity continue to grow. This period showed the highest record in growth of FDI yet the overall analysis of income statements from different nations shows a staggering rise in the difference between the poor and the richest countries (Schuller, 2011 p.77). In this regard, globalization has created the best opportunity for the developing nations and middle income nations to continue borrowing from the developed countries. Figure 4 shows a staggering increase in per capita income for developed nation as a result of increasing FDI while the developing countries growth in per capita either remained the same or declined. Being against globalization is important in managing the threats created by foreign direct investments. FDI often tends to have “crowding out” phenomenon on the low income countries. Policy analysts argue that FDI tends to “crowd out” local regional as well as domestic investments by reducing their influence and finally displacing them within the domestic or regional markets (Dentinho & Capello, 2012 p.136). National economic policies should ensure all multinational organizations source for raw material, labor and conduct their research and innovation in the foreign nations in order to transfer technology. Figure 4: Real GDP per Capita Income for Regions Source (United Nations Conference on Trade and, Development, 2004 p.20) Moreover, lack of transfer of skills, innovation, knowledge and technology to the domestic and regional entrepreneursaffects development locally (Pere & Hashorva, 2013 p.7). The ultimate impact is the overdependence of low income nations on the foreign firms resulting to lack of infrastructural developments. Policy makers should therefore ensure that a greater percentage of FDI is retained and reinvested in terms of technology and innovation to boost the domestic industry. Flows of Human Capital Globalization has not only simplified the movement of capital and goods but also the movement of people from one country to another. As stated by Dentinho & Capello(2012 p.184), international immigrants are increasingly becoming the focus for many developed nations such as United states of America and United Kingdom that have embarked on policies to manage the overwhelming immigrants. Period Total Emigration of highly Skilled From Africa Average Per year 1960 - 1975 27000 1800 1975 - 1984 40000 4400 1974 - 1987 70000 23000 1986 - 1990 50000 – 60000 middle and high level mangers emigrated from Africa 150000 1960 - 1987 100000 of which 30% were highly skilled man power left Africa for developed countries 1960s More than ½ of Africans who went to overseases did not come back Table 1: Brain Drain and Emigration from Africa Estimates Source (Oyowe, 1996 p.15) There is no doubt about the impact of globalization on the development of high income nations. This has resulted into unprecedented flow of human capital. As stated by Bush(2007 p.197), skilled professionals tend to move from the underdeveloped countries to developed countries which impacts negatively on the distribution of human capital in the global context. Developing countries should focus on building their local institutions in order to retain professionals for the development of health and education, agriculture, technology and innovation which are critical for growth. According to Dentinho & Capellod(2012 p.186), developed countries like the US have recorded high figures of working immigrants compared to the working age population thus impacts on the local economic environment as well. Table 1 shows human capital outflow from Africa to Europe and America during the period of globalization. As observed by Akokpari(2006 p.127), globalization has disintegrated the international barriers and as a result many countries are beginning to open up their boarders to working immigrants. In this regard, globalization creates an opportunity for developed countries to exploit low income countries by importing their trained professionals (Chaichian, 2012 p.21). The natures of goods traded across the boarders have also changed with the age of globalization. Traditionally, cross boarder trades mainly comprised of finished goods, however, globalization has created opportunity for trade on intermediate and unprocessed goods. Conclusions We stated that true development is one that seeks to turn around the lives of people and not merely increase their economic wealth. The evidence presented in this discussion shows that being against globalization stimulates benefits, strengthen the local institutions and economic growth in the long run. Being against disintegration prevents disengagement of the state from economic activities hence both the national political as well as economic authority of the country lies with the people. In this regard, being against globalization ensures that low income nation’s foreign policy decision making is based upon economic considerations political concerns of the nation. This will reduce level of inequality and help in aligning their policies within the mechanisms outlined by their domestic policies The benefits of FDI are unevenly distributed across different nations with the developing nations gaining less. Moreover, Policy analysts argue that FDI tends to “crowd out” local regional as well as domestic investments by reducing their influence and finally displacing them within the domestic or regional markets. This can be reduced by strengthening local investments thus reducing the level of borrowing. Strengthening local institutions and being against the forces of globalization is also important in managing increased human capital flows thus the trained professionals are retained to develop agriculture, health and industries which are key to building GDP. References Akokpari, J 2006, Globalization, Migration, and the Challenges of Development in Africa, Perspectives on Global Development & Technology, 5, 3, pp. 125-153. 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Howard-Hassmann, RE 2010, Can Globalization Promote Human Rights?, University Park, Pa: Pennsylvania State University Press. Jaumotte, F, Lall, S, &Papageorgiou, C 2013, Rising income Inequality: technology, or trade and financial globalization?’ IMF Economic Review, 61, 2, pp. 271-309. Kçay, E 2011, Globalization and Its Effects on Nation-State, Gümüshane University Electronic Journal Of The Institute Of Social Science, 2, 3, P. 47. Oyowe, A., 1996, Brain drain: Colossal loss of investment for developing countries, Europe’s Forum on International Cooperation. Article No. 159. Pere, E., & Hashorva, A 2013, ‘Business regulation and economic growth in the Western Balkan countries, Eastern’, Journal of European Studies, 4, 1, pp.5-15. Porter, R, & Vernon, R 2001, Efficiency, Equity, And Legitimacy: The Multilateral Trading System At the Millennium, Cambridge, MA: Center for Business and Government. 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