To What Extent Does Economic Globalisation Aid the Poor - Literature review Example

Globalization normally represents dominance of liberal economic processes at the expense of politics-led governance. As countries have to open their borders for capital and trade; they must adhere to policies set by an international economic order. According to (Modebadze, 2012), a “global government” was thus created which monitors and governs the world economy, consisting of the World Trade Organization (WTO), International Monetary Fund (IMF) and the World Bank. Evidently, most developing countries, particularly in Africa, fail to meet the optimum conditions for investors to operate. This makes investors hesitant to commit themselves to activities of the nation, which thus hurts their chances of development. Such international institutions aim to promote the levels of economic developments in poor countries via the creation of programs like HIPC: Heavily Indebted Poor Countries Debt Initiative, which aims to reduce the burden of debt repayments to manageable levels. As identified by the International Monetary Fund (2014), a high amount of debt is one of the most prevailing problem affecting developing countries. By indicating a consistent commitment to sustainable growth policies, poor countries may be exempted from up to 80 per cent of its total debt.

However, such institutions have been criticized for the high levels of control that they have in developing countries. While they were initially founded to promote growth in poor countries by providing them with unconditional loans, interference from developed countries like the United States led to the emergence of loans based on stringent conditions (Modebadze, 2012). This has increased poverty and overdependence on such institutions from developing countries.

In Nigeria, for example, globalization has negatively affected its oil exporting revenues and leading to high rates of debts. In 2003, it was reported that more than 80 per cent of the country’s exports between 1985 and 2001 relied on oil. Other exports including food and raw materials accounted for only 1 per cent of total exports in 1990, and had reduced to 0 per cent in 2000. By 2002, the World Bank reported that the country relied primarily on oil exports, and stopped exporting ores and metals. Globalization, however, allowed oil prices to be determined in the world oil market. Fluctuations and instability led to a decline in foreign exchange earnings and recourse to external funding to meet challenges. Consequently, by 2002, the country debt hit $29.8 billion in 2002, which corresponded to a 1 per cent decline of the country’s GDP.

Conclusion

Clearly, economic globalization has made significant contributions to aid poor nations in accelerating economic development. Globalization has been manifested by the interdependence of global markets, increased functions of multinational corporations (MNCs) and the interdependence of monetary, regulatory and fiscal policies. Consequently, this has been able to narrow inequality levels and reduce poverty among the poor due to increased investments, the introduction of new technologies and creation of job opportunities. It, therefore, allows interconnectedness and interdependence of countries through economies, world trade and communications exchange (International Monetary Fund, 2014). However, globalization also led to the emergence of international divisions of labor, thus placing Africa’s role as a producer of raw materials with no control over prices, which are determined by foreign nations. As evidenced in the Nigeria case, globalization led to overdependence on oil as the main economic export. Thus the domestic market was totally disregarded and leading to increased national debts that lowered their GDP.