1. 2. 3. 4. 5. preface introduction

8/14/2019 1. 2. 3. 4. 5. Preface Introduction

1/33

1. Preface

2. introduction to globalization

3. History

4. Globalization versus regionalization

5. Globalization of the world economy and potential

benefits and costs:

I. Globalization of the World Economy: AnInterpretation

II. Impacts of Globalization on National EconomiesIII. The Benefits of Globalization Stemming from

CompetitionIV. The Costs of Globalization and Potential

ConflictsV. The Role of Global Cooperation in Dealing with

Global threats and in Creating a New PostCold War System

6. Social impacts of globalization

7. The Important Reform Measures (Step TowardsGlobalization)

8. Impact on India

9. Globalization and poverty

10. Effects of globalization

I. cultural effectsII. negative effects

11. Bibliography

Page

Contents

1


2/33

ACKNOWLEDGEMENT

We are deeply grateful to my respected guide

_________________________, Department of Applied Sciences for his

constant encouragements, tireless and invaluable guidance during

the course of the present work. Without his constant motivation,

meticulous scrutiny and support it would not have had been

possible to bring out the thesis in the present form.

Last but not the least I would like to thank all, who directly

or indirectly contributed in bringing this work to its present form.

2


3/33

Preface

Globalization the process of continuing integration of the countries in theworld is strongly underway in all parts of the globe. Supported byaccelerating pace of technological change, by price and trade liberalization,and by growing importance of supranational rules, globalization has exposednational economies to much more intense competition than ever before. Incountries in transition, the process of their integration into global economy has

been characterized by at least two region specific features. First, this is theonly region in the world that was practically de-linked from other parts ofthe world before the late 1980s. Second, the countries of the region have

been faced with a highly challenging process of transition from centrally- planned socialist-type economy into a full-fledged market economy based on private ownership.

The combination of transition and globalization processes affects overalldevelopment of transition economies in most fundamental ways. Rapidadvancementin the process of transition accompanied by full participation in the globaleconomyenables countries in a region and their economic agents to seize the newopportunities and reap benefits of globalization. Without basic developmentalcapabilities and the appropriate policy framework, however, economic actorsin countries in transition will find themselves unable both, to advanceefficiently the process of transition and to compete successfully in the global

environment.

3


4/33

What is Globalization?

There are nearly as many definitions of globalization as authors who write on thesubject. A classification of at least five broad sets of definitions:

Globalization as internationalization. The global in globalization is viewed assimply another adjective to describe cross-border relations between countries. Itdescribes the growth in international exchange and interdependence.

Globalization as liberalization. Removing government imposed restrictions onmovements between countries.

Globalization as universalization. Process of spreading ideas and experiences topeople at all corners of the earth so that aspirations and experiences around theworld become harmonized.

Globalization as westernization or modernization. The social structures ofmodernity (capitalism, industrialism, etc.) are spread the world over, destroyingcultures and local self-determination in the process.

Globalization as deterritorialization. Process of the reconfiguration ofgeography, so that social space is no longer wholly mapped in terms of territorial

places, territorial distances and territorial borders. Although the debates on thedefinition and importance of globalization have been vigorous over time, we believethat the truly relevant policy questions today are about who benefits and who doesnot; how the benefits and the costs of these processes can be shared fairly; how theopportunities can be maximized by all; and how the risks can be minimized. Inaddressing these questions, one can understand globalization to be a complex set ofdynamics offering many opportunities to better the human condition, but alsoinvolving significant potential threats. Contemporary globalization manifests itselfin various ways, three of which are of particular relevance to policy-makers. Theyalso comprise significant environmental opportunities andrisks.

1.

4


5/33

1. Globalization of the economy. The world economy globalizes as nationaleconomies integrate into the international economy through trade; foreign directinvestment; short-term capital flows; international movement of workers and peoplein general; and flows of technology. This has created new opportunities for many;

but not for all. It has also placed pressures on the global environment and on naturalresources, straining the capacity of the environment to sustain itself and exposinghuman dependence on our environment.6 A globalized economy can also produceglobalized externalities and enhance global inequities. Local environmental andeconomic decisions can contribute to global solutions and prosperity, but theenvironmental costs, as well as the economic ramifications of our actions, can beexternalized to places and people who are so far away as to seem invisible.

2. Globalization of knowledge. As economies open up, more people becomeinvolved in the processes of knowledge integration and the deepening of non-market connections, including flows of information, culture, ideology and

technology. New technologies can solve old problems, but they can also create newones. Technologies of environmental care can move across boundaries quicker, butso can technologies of environmental extraction. Information flows can connectworkers and citizens across boundaries and oceans (e.g., the rise of global socialmovements as well as of outsourcing), but they can also threaten social andeconomic networksat the local level. Environmentalism as a norm has become truly global, but so hasmass consumerism.

3. Globalization of governance. Globalization places great stress on existing

patterns of global governance with the shrinking of both time and space; theexpanding role of non-state actors; and the increasingly complex inter-stateinteractions. The global nature of the environment demands global environmentalgovernance, and indeed a worldwide infrastructure of international agreements andinstitutions has emerged and continues to grow. But many of todays globalenvironmental problems have outgrown the governance systems designed to solvethem. Many of these institutions, however, struggle as they have to respond to anever-increasing set of global challenges while remaining constrained by institutionaldesign principles inherited from an earlier, more state-centric world.

Globalization is a powerful real aspect of the new world system, and it representsone of the most influential forces in determining the future course of the planet. It

5


6/33

has many dimensions: economic, political, social, cultural, environmental, security,and others. The focus here will be on the concept of "globalization" as applied tothe world economy. This concept is one that has different interpretations to different

people. Partly as a result of these different interpretations, there are very different

reactions to "globalization," with some seeing it as a serious danger to the worldeconomic system while others see it as advancing the world economy

History

The historical origins of globalization are the subject of on-going debate. Thoughsome scholars situate the origins of globalization in the modern era, others regard itas a phenomenon with a long history.

Perhaps the most extreme proponent of a deep historical origin for globalizationwas Andre Gunder Frank an economist associated with dependency theory. Frankargued that a form of globalization has been in existence since the rise of trade links

between Sumerand the Indus Valley Civilization in the third millenium B.C. Criticsof this idea point out that it rests upon an overly-broad definition of globalization.

An early form of globalized economics and culture existed during the HellenisticAge, when commercialized urban centers were focused around the axis of Greekculture over a wide range that stretched from India to Spain, with such cities as

Alexandria,Athens, and Antioch at its center. Trade was widespread during thatperiod, and it is the first time the idea of a Cosmopolitan culture (from Greek"Cosmopolis", meaning "world city") emerged.

Others have perceived an early form of globalization in the trade links between theRoman Empire, the Parthian Empire, and the Han Dynasty. The increasingarticulation of commercial links between these powers inspired the development ofthe Silk Road, which started in western China, reached the boundaries of theParthian empire, and continued onwards towards Rome.

The Islamic Golden Age was also an important early stage of globalization, when

Jewish and Muslim traders and explorers established a sustained economy across theOld World resulting in a globalization of crops, trade, knowledge and technology.Globally significant crops such as sugarand cottonbecame widely cultivated acrossthe Muslim worldin this period, while the necessity of learning Arabic andcompleting the Hajj created a cosmopolitan culture

The advent of the Mongol Empire, though destabilizing to the commercial centersof the Middle Eastand China, greatly facilitated travel along the Silk Road. This

permitted travelers and missionaries such as Marco Poloto journey successfully(and profitably) from one end ofEurasia to the other. The so-called Pax Mongolicaof the thirteenth centuryhad several other notable globalizing effects. It witnessedthe creation of the first internationalpostal service, as well as the rapid transmissionofepidemic diseases such asbubonic plague across the newly-unified regions of

6
http://en.wikipedia.org/wiki/Modern_erahttp://en.wikipedia.org/wiki/Dependency_theoryhttp://en.wikipedia.org/wiki/Dependency_theoryhttp://en.wikipedia.org/wiki/Sumerhttp://en.wikipedia.org/wiki/Indus_Valley_Civilizationhttp://en.wikipedia.org/wiki/Third_milleniumhttp://en.wikipedia.org/wiki/Hellenistic_civilizationhttp://en.wikipedia.org/wiki/Hellenistic_civilizationhttp://en.wikipedia.org/wiki/Alexandriahttp://en.wikipedia.org/wiki/Alexandriahttp://en.wikipedia.org/wiki/Athenshttp://en.wikipedia.org/wiki/Antiochhttp://en.wikipedia.org/wiki/Roman_Empirehttp://en.wikipedia.org/wiki/Roman_Empirehttp://en.wikipedia.org/wiki/Parthian_Empirehttp://en.wikipedia.org/wiki/Han_Dynastyhttp://en.wikipedia.org/wiki/Han_Dynastyhttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Islamic_Golden_Agehttp://en.wikipedia.org/wiki/Radhanitehttp://en.wikipedia.org/wiki/Islamic_economics_in_the_worldhttp://en.wikipedia.org/wiki/Geography_in_medieval_Islamhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Muslim_Agricultural_Revolutionhttp://en.wikipedia.org/wiki/Sugarhttp://en.wikipedia.org/wiki/Cottonhttp://en.wikipedia.org/wiki/Cottonhttp://en.wikipedia.org/wiki/Muslim_worldhttp://en.wikipedia.org/wiki/Muslim_worldhttp://en.wikipedia.org/wiki/Arabichttp://en.wikipedia.org/wiki/Hajjhttp://en.wikipedia.org/wiki/Mongol_Empirehttp://en.wikipedia.org/wiki/Middle_Easthttp://en.wikipedia.org/wiki/Middle_Easthttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Marco_Polohttp://en.wikipedia.org/wiki/Marco_Polohttp://en.wikipedia.org/wiki/Eurasiahttp://en.wikipedia.org/wiki/Pax_Mongolicahttp://en.wikipedia.org/wiki/Thirteenth_centuryhttp://en.wikipedia.org/wiki/Thirteenth_centuryhttp://en.wikipedia.org/wiki/Postal_servicehttp://en.wikipedia.org/wiki/Infectious_diseaseshttp://en.wikipedia.org/wiki/Bubonic_plaguehttp://en.wikipedia.org/wiki/Dependency_theoryhttp://en.wikipedia.org/wiki/Sumerhttp://en.wikipedia.org/wiki/Indus_Valley_Civilizationhttp://en.wikipedia.org/wiki/Third_milleniumhttp://en.wikipedia.org/wiki/Hellenistic_civilizationhttp://en.wikipedia.org/wiki/Hellenistic_civilizationhttp://en.wikipedia.org/wiki/Alexandriahttp://en.wikipedia.org/wiki/Athenshttp://en.wikipedia.org/wiki/Antiochhttp://en.wikipedia.org/wiki/Roman_Empirehttp://en.wikipedia.org/wiki/Parthian_Empirehttp://en.wikipedia.org/wiki/Han_Dynastyhttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Islamic_Golden_Agehttp://en.wikipedia.org/wiki/Radhanitehttp://en.wikipedia.org/wiki/Islamic_economics_in_the_worldhttp://en.wikipedia.org/wiki/Geography_in_medieval_Islamhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Muslim_Agricultural_Revolutionhttp://en.wikipedia.org/wiki/Sugarhttp://en.wikipedia.org/wiki/Cottonhttp://en.wikipedia.org/wiki/Muslim_worldhttp://en.wikipedia.org/wiki/Arabichttp://en.wikipedia.org/wiki/Hajjhttp://en.wikipedia.org/wiki/Mongol_Empirehttp://en.wikipedia.org/wiki/Middle_Easthttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Silk_Roadhttp://en.wikipedia.org/wiki/Marco_Polohttp://en.wikipedia.org/wiki/Eurasiahttp://en.wikipedia.org/wiki/Pax_Mongolicahttp://en.wikipedia.org/wiki/Thirteenth_centuryhttp://en.wikipedia.org/wiki/Postal_servicehttp://en.wikipedia.org/wiki/Infectious_diseaseshttp://en.wikipedia.org/wiki/Bubonic_plaguehttp://en.wikipedia.org/wiki/Modern_era


7/33

Central Asia. These pre-modern phases of global or hemispheric exchange aresometimes known as archaic globalization. Up to the sixteenth century, however,even the largest systems of international exchange were limited to the Old World.

The Age of Discoverybrought a broad change in globalization, being the firstperiod in which Eurasia and Africa engaged in substantial cultural, material andbiologic exchange with theNew World. It begun in the late 15th century, when thetwo Kingdoms of the Iberian Peninsula - Portugal andCastile - sent the firstexploratory voyage. around theHorn of Africa and to the Americas, "discovered" in1492 by Christopher Columbus. Shortly before the turn of the 16th century,Portuguese started establishing trading posts (factories) from Africa to Asia andBrazil, to deal with the trade of local products likegold, spices and timber,introducing an international business center under a royal monopoly, the House ofIndia.] Global integration continued with the European colonization of the Americasinitiating the Columbian Exchange the enormous widespread exchange of plants,

animals, foods, human populations (including slaves), communicable diseases, andculture between the Easternand Western hemispheres. It was one of the mostsignificant global events concerning ecology, agriculture, and culture in history.

Colonial empires in 1800

This phase is sometimes known asproto-globalization. It was characterized by therise of maritime European empires, in the 16th and 17th centuries, first thePortugueseand Spanish Empires, and later the Dutch andBritishEmpires. In the

17th century, globalization became also a private business phenomenon whenchartered companies like British East India Company (founded in 1600), oftendescribed as the first multinational corporation, as well as theDutch East IndiaCompany (founded in 1602) were established. Because of the large investment andfinancing needs and high risks involved in international trade, the British East IndiaCompany became the first company in the world to share risk and enable jointownership of companies through the issuance ofsharesof stock: an important driverfor globalization.

Great Britain grew rich in the 19th century as the first global economic superpower,because of its superior manufacturing technology and improved globalcommunications such as steamships and railroads.

The 19th century witnessed the advent of globalization approaching its modernform. Industrialization allowed cheap production of household items usingeconomies of scale, while rapid population growth created sustained demand forcommodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. After the Opium Wars and the completion of British conquestofIndia, vast populations of these regions became ready consumers of Europeanexports. It was in this period that areas of sub-Saharan Africa and the Pacific islands

were incorporated into the world system. Meanwhile, the conquest of new parts ofthe globe, notably sub-Saharan Africa, by Europeans yielded valuable natural

7
http://en.wikipedia.org/wiki/Central_Asiahttp://en.wikipedia.org/wiki/Central_Asiahttp://en.wikipedia.org/wiki/Archaic_globalizationhttp://en.wikipedia.org/wiki/Archaic_globalizationhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Age_of_Discoveryhttp://en.wikipedia.org/wiki/Age_of_Discoveryhttp://en.wikipedia.org/wiki/Africahttp://en.wikipedia.org/wiki/New_Worldhttp://en.wikipedia.org/wiki/Iberian_Peninsulahttp://en.wikipedia.org/wiki/Kingdom_of_Portugalhttp://en.wikipedia.org/wiki/Kingdom_of_Castilehttp://en.wikipedia.org/wiki/Kingdom_of_Castilehttp://en.wikipedia.org/wiki/Horn_of_Africahttp://en.wikipedia.org/wiki/Horn_of_Africahttp://en.wikipedia.org/wiki/Americashttp://en.wikipedia.org/wiki/Christopher_Columbushttp://en.wikipedia.org/wiki/Christopher_Columbushttp://en.wikipedia.org/wiki/Factory_(trading_post)http://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Spiceshttp://en.wikipedia.org/wiki/Timberhttp://en.wikipedia.org/wiki/Casa_da_%C3%8Dndiahttp://en.wikipedia.org/wiki/Casa_da_%C3%8Dndiahttp://en.wikipedia.org/wiki/European_colonization_of_the_Americashttp://en.wikipedia.org/wiki/Columbian_Exchangehttp://en.wikipedia.org/wiki/Slave_laborhttp://en.wikipedia.org/wiki/Communicable_diseasehttp://en.wikipedia.org/wiki/Eastern_Hemispherehttp://en.wikipedia.org/wiki/Eastern_Hemispherehttp://en.wikipedia.org/wiki/Western_Hemispherehttp://en.wikipedia.org/wiki/Ecologyhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Culturehttp://en.wikipedia.org/wiki/1800http://en.wikipedia.org/wiki/Proto-globalizationhttp://en.wikipedia.org/wiki/Portuguese_Empirehttp://en.wikipedia.org/wiki/Portuguese_Empirehttp://en.wikipedia.org/wiki/Spanish_Empirehttp://en.wikipedia.org/wiki/Dutch_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Chartered_companieshttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Dutch_East_India_Companyhttp://en.wikipedia.org/wiki/Dutch_East_India_Companyhttp://en.wikipedia.org/wiki/Dutch_East_India_Companyhttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/United_Kingdom_of_Great_Britain_and_Irelandhttp://en.wikipedia.org/wiki/Superpowerhttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Economies_of_scalehttp://en.wikipedia.org/wiki/Economies_of_scalehttp://en.wikipedia.org/wiki/Imperialismhttp://en.wikipedia.org/wiki/Opium_Warshttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Central_Asiahttp://en.wikipedia.org/wiki/Archaic_globalizationhttp://en.wikipedia.org/wiki/Old_Worldhttp://en.wikipedia.org/wiki/Age_of_Discoveryhttp://en.wikipedia.org/wiki/Africahttp://en.wikipedia.org/wiki/New_Worldhttp://en.wikipedia.org/wiki/Iberian_Peninsulahttp://en.wikipedia.org/wiki/Kingdom_of_Portugalhttp://en.wikipedia.org/wiki/Kingdom_of_Castilehttp://en.wikipedia.org/wiki/Horn_of_Africahttp://en.wikipedia.org/wiki/Americashttp://en.wikipedia.org/wiki/Christopher_Columbushttp://en.wikipedia.org/wiki/Factory_(trading_post)http://en.wikipedia.org/wiki/Goldhttp://en.wikipedia.org/wiki/Spiceshttp://en.wikipedia.org/wiki/Timberhttp://en.wikipedia.org/wiki/Casa_da_%C3%8Dndiahttp://en.wikipedia.org/wiki/Casa_da_%C3%8Dndiahttp://en.wikipedia.org/wiki/European_colonization_of_the_Americashttp://en.wikipedia.org/wiki/Columbian_Exchangehttp://en.wikipedia.org/wiki/Slave_laborhttp://en.wikipedia.org/wiki/Communicable_diseasehttp://en.wikipedia.org/wiki/Eastern_Hemispherehttp://en.wikipedia.org/wiki/Western_Hemispherehttp://en.wikipedia.org/wiki/Ecologyhttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Culturehttp://en.wikipedia.org/wiki/1800http://en.wikipedia.org/wiki/Proto-globalizationhttp://en.wikipedia.org/wiki/Portuguese_Empirehttp://en.wikipedia.org/wiki/Spanish_Empirehttp://en.wikipedia.org/wiki/Dutch_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/Chartered_companieshttp://en.wikipedia.org/wiki/British_East_India_Companyhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Dutch_East_India_Companyhttp://en.wikipedia.org/wiki/Dutch_East_India_Companyhttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/United_Kingdom_of_Great_Britain_and_Irelandhttp://en.wikipedia.org/wiki/Superpowerhttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Economies_of_scalehttp://en.wikipedia.org/wiki/Imperialismhttp://en.wikipedia.org/wiki/Opium_Warshttp://en.wikipedia.org/wiki/India


8/33

resources such as rubber, diamonds and coal and helped fuel trade and investmentbetween the European imperial powers, their colonies, and the United States. SaidJohn Maynard Keynes,

The first phase of "modern globalization" began to break down at the beginning ofthe 20th century, with the first World War. The novelist VM Yeates criticised thefinancial forces of globalisation as a factor in creatingWorld War I.The final deathknell for this phase came during the gold standard crisis andGreat Depression in thelate 1920s and early 1930s.

In the middle decades of the twentieth century globalization was largely driven bythe global expansion ofmultinational corporations based in the United States andEurope, and worldwide exchange of new developments in science, technology and

products, with most significant inventions of this time having their origins in the

Western world according to Encyclopedia Britannica. Worldwide export ofwesternculture went through the new massmedia: film, radio andtelevision and recordedmusic. Development and growth of international transport and telecommunication

played a decisive role in modern globalization.

In late 2000s, much of the industrialized world entered into a deep recession. Someanalysts say the world is going through a period ofdeglobalization after years ofincreasing economic integration. Up to 45% of global wealth had been destroyed bythe global financial crisis in little less than a year and a half.China has recently

become the worlds largest exportersurpassing Germany

8
http://en.wikipedia.org/wiki/Rubberhttp://en.wikipedia.org/wiki/Diamondshttp://en.wikipedia.org/wiki/Coalhttp://en.wikipedia.org/wiki/VM_Yeateshttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/Gold_standardhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Multinational_corporationshttp://en.wikipedia.org/wiki/Inventionhttp://en.wikipedia.org/wiki/Western_worldhttp://en.wikipedia.org/wiki/Encyclopedia_Britannicahttp://en.wikipedia.org/wiki/Western_culturehttp://en.wikipedia.org/wiki/Western_culturehttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Mediahttp://en.wikipedia.org/wiki/Filmhttp://en.wikipedia.org/wiki/Radiohttp://en.wikipedia.org/wiki/Televisionhttp://en.wikipedia.org/wiki/Televisionhttp://en.wikipedia.org/wiki/Musichttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Late_2000s_recessionhttp://en.wikipedia.org/wiki/Deglobalizationhttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Rubberhttp://en.wikipedia.org/wiki/Diamondshttp://en.wikipedia.org/wiki/Coalhttp://en.wikipedia.org/wiki/VM_Yeateshttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/Gold_standardhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Multinational_corporationshttp://en.wikipedia.org/wiki/Inventionhttp://en.wikipedia.org/wiki/Western_worldhttp://en.wikipedia.org/wiki/Encyclopedia_Britannicahttp://en.wikipedia.org/wiki/Western_culturehttp://en.wikipedia.org/wiki/Western_culturehttp://en.wikipedia.org/wiki/Mass_mediahttp://en.wikipedia.org/wiki/Mediahttp://en.wikipedia.org/wiki/Filmhttp://en.wikipedia.org/wiki/Radiohttp://en.wikipedia.org/wiki/Televisionhttp://en.wikipedia.org/wiki/Musichttp://en.wikipedia.org/wiki/Transporthttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/Industrializationhttp://en.wikipedia.org/wiki/Late_2000s_recessionhttp://en.wikipedia.org/wiki/Deglobalizationhttp://en.wikipedia.org/wiki/People's_Republic_of_Chinahttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Germany


9/33

Globalization versus regionalization

Globalization is now a forceful process that is unlikely to be reversed. Thefuture policy alternatives for countries and regions have thus to be analysed inthecontext of the global economy with free trade of goods and services, freemovement of capital, technology and skills and with improvements intransportation and communication links. The solution to current problems at the

global level depends to a great extent on the decisions taken within a rathernarrow group of industrialized countries, primarily within the G-7 countries. Othercountries and regions, and particularly developing countries and countries intransition, are de facto second league players and their ability to influence

prevailing world trends is rather limited. The challenge for these countries andregions therefore is to find their own responses to the overall trend ofglobalization.

Are globalization and regionalization processes that substitute or complement eachother? Should countries enter immediately into the global economy or should

they opt for regional integration as a first step that will later on be followed bymorecomplete global integration. Responses to these questions are country specific anddepend on geography, history and culture of the particular country as well as on thelevel and structural patterns of its economy. In spite of the differences, thereare convincing arguments that call each region of the world to be involved in a

broad and deep debate on the behaviour of the present globalizing world and todesign a strategy on how to cope with the challenges of globalization.

This strategy has two components, a national one and a regional one. A

prerequisite for a region to be effective in this globalization debate is thateach country of the region puts its own house in order. Macroeconomic balance(effective monetary and fiscal policy and sustainable balance of payments

position) together with effective resource utilization are necessary conditionsfor both, broadening the margin of manoeuvre for governments and forachieving sustainable development. The second element of this strategy at thenational level is that the role of governments should be redefined (Emmerij, p.12)). The policy objective is not to dismantle or shrink government, but tostrengthen those public policy instruments that promote development and equityas the market itself does not solve these problems. As will be discussed later(see chapter 2.3.), left to its own mechanism, market actually worsens socialimbalances and tensions.

9


10/33

GLOBALIZATION OF THE WORLDECONOMY:POTENTIAL BENEFITS ANDCOSTS

1. Globalization of the World Economy: An Interpretation

"Globalization" will be understood here to mean major increases in worldwidetrade and exchanges in an increasingly open, integrated, and borderless internationaleconomy. There has been remarkable growth in such trade and exchanges, not only intraditional international trade in goods and services, but also in exchanges of currencies;in capital movements; in technology transfer; in people moving through internationaltravel and migration; and in international flows of information and ideas. One measure ofthe extent of globalization is the volume of international financial transactions, with some$1.2 trillion flowing through New York currency markets each day, and with the volumeof daily international stock market transactions exceeding this enormous amount.

Globalization has involved greater openness in the international economy, anintegration of markets on a worldwide basis, and a movement toward a borderless world,all of which have led to increases in global flows. There are several sources ofglobalization over the last several decades. One such source has been technologicaladvances that have significantly lowered the costs of transportation and communicationand dramatically lowered the costs of data processing and information storage and

retrieval. The latter stems from developments over the last few decades in electronics,especially the microchip revolution. Electronic mail, the Internet, and the World WideWeb are some of the manifestations of this new technology, where today's $2,000 laptopcomputer is many times more powerful than a $10 million mainframe computer oftwenty years ago.

A second source of globalization has been trade liberalization and other forms ofeconomic liberalization that have led to reduced trade protection and to a more liberalworld trading system. This process started in the last century, but the two World Warsand the Great Depression interrupted it. It resumed after World War II through the most-

favored-nation approach to trade liberalization, as embodied in the 1946 GeneralAgreement on Tariffs and Trade (GATT) and now in the World Trade Organization

10


11/33

(WTO). As a result, there have been significant reductions in tariffs and other barriers totrade in goods and services. Other aspects of liberalization have led to increases in themovement of capital and other factors of production. Some have suggested thatglobalization is little more than a return to the world economy of the late nineteenth

century and early twentieth century, when borders were relatively open, when there weresubstantial international capital flows and migrations of people, and when the majornations of Europe depended critically on international trade. This is particularly the viewof some British scholars, looking back to the period of British imperial dominance of theworld economy. While there are some similarities in terms of trade and capitalmovements, the period of a century ago did not have some of the major technologicalinnovations that have led to a globalized world economy today that is qualitativelydifferent from the international economy of the last century.

A third source of globalization has been changes in institutions, whereorganizations have a wider reach, due, in part, to technological changes and to the morewide-ranging horizons of their managers, who have been empowered by advances incommunications. Thus, corporations that had been mainly focused on a local market haveextended their range in terms of markets and production facilities to a national,multinational, international, or even global reach. These changes in industrial structurehave led to increases in the power, profits, and productivity of those firms that canchoose among many nations for their sources of materials, production facilities, andmarkets, quickly adjusting to changing market conditions. Virtually every major nationalor international enterprise has such a structure or relies on subsidiaries or strategicalliances to obtain a comparable degree of influence and flexibility. As one measure oftheir scale, almost a third of total international trade now occurs solely within these

multinational enterprises. With the advent of such global firms, international conflict has,to some extent, moved from nations to these firms, with the battle no longer amongnations over territory but rather among firms over their share of world markets. Theseglobal firms are seen by some as a threat to the scope and autonomy of the state, but,while these firms are powerful, the nation state still retains its traditional and dominantrole in the world economic and political system.

Non-government organizations, the NGO's, have also taken a much broaderperspective that, as in the case of the global firms, is often multinational or global. Eveninternational organizations, such as the United Nations, the International Monetary Fund

and World Bank, and the new World Trade Organization have new global roles. Overall,multinational enterprises and other such organizations, both private and public, have

become the central agents of the new international globalized economy.

A fourth reason for globalization has been the global agreement on ideology, witha convergence of beliefs in the value of a market economy and a free trade system. This

process started with the political and economic changes that started in the 1978 reformsin China and then involved a falling dominoes series of revolutions in Eastern andCentral Europe starting in 1989 that ended with the dissolution of the Soviet Union inDecember 1991. This process led to a convergence of ideology, with the former division

between market economies in the West and socialist economies in the East having beenreplaced by a near-universal reliance on the market system. This convergence of beliefsin the value of a market economy has led to a world that is no longer divided into market-

11


12/33

oriented and socialist economies. A major aspect of this convergence of beliefs is theattempt of the former socialist states to make a transition to a market economy. Theseattempted transitions, especially those in the former Soviet Union and in Eastern andCentral Europe have, however, been only partially successful. The nations involved and

their supporters in international organizations and advanced western market economieshave tended to focus on a three-part agenda for transition, involving: 1) stabilization ofthe macroeconomy, 2) liberalization of prices, and 3) privatization of state-ownedenterprise. Unfortunately, this SLP agenda fails to appreciate the importance of

building market institutions, of establishing competition, and of providing for anappropriate role for the government in a modern mixed economy.

A fifth reason for globalization has been cultural developments, with a move to aglobalized and homogenized media, the arts, and popular culture and with the widespreaduse of the English language for global communication. Partly as a result of these culturaldevelopments, some, especially the French and other continental Europeans, seeglobalization as an attempt at U.S. cultural as well as economic and political hegemony.In effect, they see globalization as a new form of imperialism or as a new stage ofcapitalism in the age of electronics. Some have even interpreted globalization as a newform of colonialism, with the U.S. as the new metropole power and with most of the restof the world as its colonies, supplying it not only with raw materials, as in earlier formsof European colonialization, but also with technology; production facilities; labor,capital, and other inputs to the production process; and markets on a global basis.

Whether one sees globalization as a negative or as a positive development, it mustbe understood that it has clearly changed the world system and that it poses both

opportunities and challenges. It is also clear that the above technological, policy,institutional, ideological, and cultural developments that have led to globalization are stillvery active. Thus, barring a radical move in a different direction, these trends towardgreater globalization will likely continue or even accelerate in the future. One importantaspect of these trends will be the growth in international trade in services that has alreadyincreased substantially but promises even greater growth in the future, especially in suchareas as telecommunications and financial services. The result will be continued movestoward a more open and a more integrated world as it moves closer and closer to a planetwithout borders and to a more integrated, open, and interdependent world economy. Theresult will be even greater worldwide flows of goods, services, money, capital,

technology, people, information, and ideas.

2. Impacts of Globalization on National Economies

Globalization has had significant impacts on all economies of the world, withmanifold effects. It affects their production of goods and services. It also affects theemployment of labor and other inputs into the production process. In addition, it affectsinvestment, both in physical capital and in human capital. It affects technology andresults in the diffusion of technology from initiating nations to other nations. It also hasmajor effects on efficiency, productivity, and competitiveness.

Several impacts of globalization on national economies deserve particularmention. One is the growth of foreign direct investment (FDI) at a prodigious rate, one

12


13/33

that is much greater than the growth in world trade. Such investment plays a key role intechnology transfer, in industrial restructuring, and in the formation of global enterprises,all of which have major impacts at the national level. A second is the impact ofglobalization on technological innovation. New technologies, as already noted, have been

a factor in globalization, but globalization and the spur of competition have alsostimulated further advances in technology and speeded up its diffusion within nationsthrough foreign direct investment. A third is the growth of trade in services, includingfinancial, legal, managerial, and information services and intangibles of all types thathave become mainstays of international commerce. In 1970, less than a third of foreigndirect investment related to the export of services, but today that has risen to half and it isexpected to rise even further, making intellectual capital the most important commodityon world markets. As a result of the growth of services both nationally andinternationally, some have called this "the age of competence," underscoring theimportance of lifelong education and training and the investment in human capital inevery national economy.

3. The Benefits of Globalization Stemming from Competition

It has already been noted that globalization has both positive and negative effects.This section will focus on its positive effects of globalization, stemming fromcompetition, while the next will focus on its negative effects, which could lead to

potential conflicts. Finally, the last section will consider the potential for internationalcooperation to diminish or to offset the negative effects of globalization.

Globalization has led to growing competition on a global basis. While some fearcompetition, there are many beneficial effects of competition that can increase productionor efficiency. Competition and the widening of markets can lead to specialization and thedivision of labor, as discussed by Adam Smith and other early economists writing on the

benefits of a market system. Specialization and the division of labor, with theirimplications for increases in production, now exist not just in a nation but on a worldwide

basis. Other beneficial effects include the economies of scale and scope that canpotentially lead to reductions in costs and prices and are conducive to continuingeconomic growth. Other benefits from globalization include the gains from trade inwhich both parties gain in a mutually beneficial exchange, where the "parties" can beindividuals, firms and other organizations, nations, trading blocs, continents, or other

entities. Globalization can also result in increased productivity as a result of therationalization of production on a global scale and the spread of technology andcompetitive pressures for continual innovation on a worldwide basis.

Overall, these beneficial effects of competition stemming from globalization showits potential value in improving the position of all parties, with the potential for increasedoutput and higher real wage levels and living standards. The result is a potential forgreater human well being throughout the world. Of course, there is the distributional orequity issue of who does, in fact, gain from these potential benefits of globalization.

4. The Costs of Globalization and Potential Conflicts

13


14/33

Globalization involves not only benefits, but also has costs or potential problemsthat some critics see as great perils. These costs could lead to conflicts of various types,whether at the regional, national, or international level. One such cost or problem is that

of who gains from its potential benefits. There can be substantial equity problems in thedistribution of the gains from globalization among individuals, organizations, nations,and regions. Indeed, many of the gains have been going to the rich nations or individuals,creating greater inequalities and leading to potential conflicts nationally andinternationally. Some have suggested the possibility of convergence of incomes globally

based on the observation that the poor nations are growing at a faster rate than the richnations. The reality, however, is that a small group of nations, the "tiger economies" ofEast Asia, have been growing at rapid rates, while the least developed nations of Africa,Asia, and South and Central America have been growing at a slower rate than the richnations. These poor nations are thus becoming increasingly marginalized. The result has

been not a convergence but rather a divergence or polarization of incomes worldwide,with the rapid-growth economies joining the rich nations, but with the poor nationsslipping even further behind. This growing disparity leads to disaffection and possiblyeven international conflicts as nations seek to join the club of rich nations and have-notnations struggle with the have nations for their share of world output. This issue ofdistribution is a major challenge in the process of the globalization of the worldeconomy.

A second cost or problem stemming from globalization is that of major potentialregional or global instabilities stemming from the interdependencies of economies on aworldwide basis. There is the possibility that local economic fluctuations or crises in one

nation could have regional or even global impacts. This is not just a theoretical possibilityas seen in the exchange rate and financial crisis in Asia, starting in Thailand in 1998 andthen spreading to other Southeast Asian economies and even to South Korea. Theselinkages and potential instabilities imply great potential mutual vulnerability ofinterconnected economies. A worldwide recession or depression could lead to calls to

break the interdependencies that have been realized through the globalization process, ashappened in the Great Depression of the 1930's, with competitive devaluations, beggar-my-neighbor policies, escalating tariffs, other forms of protectionism, etc. The resultcould be economic conflict, gravitating to economic warfare and possibly to militaryconflict, repeating the history of the interwar period leading to the largest war in human

history.

A third type of problem stemming from globalization is that the control ofnational economies is seen by some as possibly shifting from sovereign governments toother entities, including the most powerful nation states, multinational or global firms,and international organizations. The result is that some perceive national sovereignty as

being undermined by the forces of globalization. Thus globalization could lead to a beliefamong national leaders that they are helplessly in the grip of global forces and an attitudeof disaffection among the electorate. The result could be extreme nationalism andxenophobia, along with calls for protectionism and the growth of extremist political

movements, ultimately leading to potential conflicts.

14


15/33

It is sometimes alleged that a cost of globalization is unemployment in the highwage industrialized economies. The low unemployment rates in many high wage nationsand their high rates in many low wage nations disprove this allegation. National policyand technological trends are much more important determinants of employment than

global factors. A related myth is that globalization is threatening the social welfareprovisions of some states, but other factors are much more important, including domesticfiscal policy and demographic trends. In both cases, globalization is a convenientscapegoat for failures of national policy.

It is important also to appreciate that the economic aspects of globalization are butone component of its effects. There are potential noneconomic impacts of globalizationinvolving great risks and potential costs, even the possibility for catastrophe. One is thatof security, where the negative effects of globalization could lead to conflicts, assuggested above, or the very process of globalization leading to integration of marketscould make conflicts escalate beyond a particular region or raise the stakes of conflict, forexample, from conventional weapons to weapons of mass destruction. A secondnoneconomic area in which globalization could lead to catastrophic outcomes is that of

political crises, that could escalate from local to large-scale challenges and, if unresolved,to a catastrophic outcome. A third such area is that of the environment and health, wherethe greater interconnectedness stemming from globalization could lead again tocatastrophic outcomes, such as those stemming from global environmental impacts, suchas global warming, and pandemics.

5. The Role of Global Cooperation in Dealing with Global Threats andin Creating a New Post Cold War System

The last two sections have highlighted both the benefits and the costs stemmingfrom globalization. Some could see globalization as a very dangerous negativedevelopment by focusing on the costs and the potential for conflict while others could seeit as a positive development offering unprecedented opportunities. Both of these viewscontain some elements of truth, but each should be offset by the other in order to gain afull understanding of the impacts of globalization. There are twin myths here, theoptimistic one that globalization leads to only positive outcomes and the pessimistic onethat globalization leads only to negative outcomes. Any objective treatment or net

assessment, however, would have to recognize both the benefits and costs ofglobalization.

What is the net result of globalization, when taking both benefits and costs intoaccount? The answer depends crucially on the nature of the world system. In a world

beset by conflicts, globalization would probably have a net negative impact. Conversely,in a cooperative world, globalization would probably have a net positive impact. Thus,globalization represents a major challenge and at the same time an unprecedentedopportunity in terms of the possibilities for conflict or cooperation. The challenge is tocreate a new world system in the aftermath of the cold war and the movements toward

globalization that would enhance its generally beneficial effects and that would minimizeits actual or potential costs. The key to such a world system will be cooperation among

15


16/33

the nations of the world and dynamic innovation, including the establishment of newinstitutions.

The challenge of the present globalized and post cold war economy is comparable

to the challenge facing the winning nations in World War II. The old world had beendestroyed and a new world had to be created. Not one, but two world systems werecreated, one in the West and the other in the East. Both involved the creation of newinstitutions that would replace the ones that had been destroyed in the war. Each side hadits own ideology and organization, that in the West being market oriented and that in theEast being socialist. Now, of course, the ideological divide has dissolved, where there is aconvergence of ideology on the value of a market economy.

A small group of Americans helped create a new world system for the Westduring the period from 1945 to 1955. One of the major participants was Dean Acheson,the U.S. Secretary of State during part of this period. His memoirs are aptly named

Present at the Creation, given his role in creating this new world system. Another wasWill Clayton, who developed the blueprints for both the Marshall Plan and the GeneralAgreement on Tariffs and Trade. These people, together with President Truman, GeorgeMarshall, and others created the institutions that brought the devastated nations of Europeinto the world community. These institutions included GATT, which evolved into theWTO; the United Nations; the World Bank and the IMF; the Marshall Plan and OEEC(later to evolve into the OECD); NATO; and others. These institutions and the new worldsystem that they helped create was most successful in bringing the nations of Europe,including both former enemies and devastated allies, into this new world system and in

promoting reconstruction and growth.

The present post Cold War period has some similarities to the one after WorldWar II in that a new world system must be created. Such a system that would have totake account of the new situation of a world not divided by ideology and becomingincreasingly integrated. The sequence of revolutions that began in Eastern Europe in1989 led directly or indirectly to the end of the Cold War, the demise of the WarsawPact, the unification of Germany, the dissolution of the Soviet Union, and the attemptedtransition of the former socialist states to democracy and a market economy, with onlymixed success. The West for its part has largely failed to establish structures such asthose developed after World War II to bring Russia, other former Soviet states, and

Central and Eastern Europe into the world economic and political system. In somerespects the treatment of Russia in the current period is similar to the treatment ofGermany after World War I rather than its treatment after World War II. NATOexpansion is perhaps the most serious error made in the post Cold War period, in that itisolated Russia and added little to European security but at enormous expense. The totalcost of NATO expansion will, in fact, be of the same order of magnitude as the currentvalue of the Marshall Plan, some $90 billion. A new Marshall Plan for the formersocialist nations of Europe could have promoted their transition and growth throughinstitution building, industrial restructuring, investment and capital inflows, theirintegration into the world economy, and their cooperation. These would have contributed

more to European security than the acquisition of advanced fighter jets and other militaryequipment by some of these nations that have been admitted into NATO.

16


17/33

Overall, the challenge of globalization will require truly cooperative efforts of thegreat nations, especially among the new great powers of the European Union, the UnitedStates, Canada, Japan, Russia, China, India, Brazil, and others. Their joint activity inestablishing new political arrangements and institutions could go a long way to solving

global problems, including the economic and other problems stemming fromglobalization. As was true in the earlier period of the creation of a new world, it will benecessary to revamp existing institutions or to create new ones so as to deal witheconomic challenges, such as the problems of distribution and mutual vulnerabilitystemming from globalization. These institutions must have global perspectives andresponses and they will require substantial resources and enforcement mechanisms,including some elements of supranational decision making and authority, along withappropriate transparency and accountability.

Consider how global cooperation and new international institutions can treat theseveral problems identified earlier as costs or problems of globalization. The first of these

problems was that of the distribution of income and specifically the gains fromglobalization both within and between nations. A supranational institution based onglobal cooperation could address this problem. It would, in effect, tax the nations gainingfrom globalization and use the proceeds to provide financial and technical assistance tothose losing from globalization. This is already being done in a somewhat haphazard waythrough the World Bank and, in particular, its soft lending arm, the InternationalDevelopment Association (IDA) that provides subsidized loans to poor nations on morefavorable terms than the World Bank could give. It should be done, however, on a moresystematic basis, which would require either a new international institution or anexpansion and change in the nature of the World Bank. The rich nations should be

expected to support the establishment of such an institution as an investment in globalstability, if they recognize the dangers of serious disparities in the worldwide distributionof income.

The second of the problems identified earlier as stemming from globalization wasthe fragility of the international economic system, leading to mutual vulnerability. Again,international cooperation and the development of new institutions or the expansion ofexisting institutions could address this problem. The International Monetary Fund could

be instrumental in dealing with this problem. The IMF has played a key role in providingsupport to nations that have experienced instabilities, as in its support for Mexico during

the peso crisis and its agreement to support South Korea during the East Asia financialcrisis. A more credible insurance against these risks would require a substantialaugmentation of the resources of the IMF, the assets of which have not grown at the samerate as international financial exchanges. International cooperation could also lead to theimplementation of the Tobin tax, a small tax on foreign exchange transactions that could

play a valuable role in limiting destabilizing currency speculation and, at the same time,provide funding for international organizations.

The third of the problems identified earlier as stemming from globalization wasthat of the perceived loss of sovereignty of national governments and political leaders.

This development could lead to fear of the loss of ability of nations to determine theireconomic policies, political disaffection, and the rise of extremist politicians and politicalmovements. The process of globalization, however, need not lead to a loss of

17


18/33

sovereignty. Once again, international cooperation can play a role in ensuring thesovereignty of national governments and the proper role for political leaders, drawing afirm line between what is in the province of these governments and their leaders on theone side and what is in the province of international organizations and multinational or

global enterprise on the other. Participation in the establishment of the needed institutionsto deal with these and other problems stemming from globalization will, by itself, helppolitical leaders to regain a sense of control over their futures and positions in the globalcommunity. For example, the regulatory regimes of nations and even internationalorganizations have become more porous and more easily overcome through advances intechnology. Examples include the lack of regulation of the global integrated capitalmarket, of trade in information services that is widely expected to grow enormously, andof labor and environmental safeguards. Cooperation among nations and internationalorganizations could offset these developments by themselves taking advantage of recenttechnological advances and using them to reassert control through cooperative activities.

Overall, there are several possible vehicles for cooperation as a way of respondingto the challenges of globalization. One is the strengthening of existing internationalinstitutions. Another is the establishment of new institutions, as in the case of the WorldTrade Organization, which has a binding dispute settlement mechanism of asupranational character. A third is the establishment of larger entities, such as theEuropean Union, or loose combinations of nations to treat certain economic issues, suchas the G-8 or the Asian Pacific Economic Cooperation (APEC).

Global cooperation through formal or informal institutions provides anincreasingly important mechanism to ensure the proper treatment of global problems,

including those stemming from globalization. Through such global cooperation it shouldbe possible to ensure equity and stability in a globalized world, leading to economicgrowth for all, the transition to a market economic for former socialist states, andeconomic development for the poorer nations. Such cooperation is also the way to treatthe noneconomic problems of globalization, including those ofenvironmental and health

protection on a world-wide basis, freedom from political crises or instability, and globalpeace and security for the planet.

18


19/33

SOCIAL IMPACTS OF GLOBALIZATION

Globalization is currently a popular and controversial issue, though oftenremaining a loose and poorly-defined concept. Sometimes too comprehensively, theterm is used to encompass increases in trade and liberalization policies as well asreductions in transportation costs and technology transfer. As far as its impact isconcerned,discussion of globalization tends to consider simultaneously its effects on economicgrowth, employment and income distribution - often without distinguishing betweencountries and within-country inequalities and other social impacts such asopportunities for poverty alleviation, human and labour rights, environmentalconsequences and so on. Moreover, the debate is often confused from amethodological point of view by the interactions between history, economics,

political science and other social sciences. Partially as a consequence of the lack ofclear definitions and methodological choices, the current debate is characterized byan harsh divide between the supporters and the opponents of globalization, where

both groups appear to be ideologically committed and tend to exploit anecdotes(successfully or unsuccessfully respectively), rather than sound, comprehensiveempirical evidence to support their cause .Since the debate appears quite confusedand the issues overlapping, one of the aims of this contribution is to select some

precisely-defined topics and to give an account of theories and applied approacheswhich have really contributed to the understanding of the social impact ofglobalization in developing countries (DCs). With this purpose in mind, it is

therefore important to clarify the limitations of the discussion put forward in thefollowing sections.

Definition.

An ex-postmeasurable and objective definition of globalization has been used,namely increasing trade openness and FDI. The purpose is to discuss whether theactual increase in trade and FDI inflows is favoring or damaging DCs engaging inglobalization. In this context, we will not address liberalization policies; these are

ex-anteproposals which may be announced and not implemented or implementedbut not effective. When evaluating the effect of globalization, what is reallyimportant is not the impact of (often ineffective) policies but the consequences of

19


20/33

the actual increase in measurable globalization indexes such as trade openness andFDI. An important limitation of the subsequent analysis is that some aspects ofglobalization will not be treated (see for instance migration) or only marginallydiscussed (see for instance financial and portfolio flows).

Countries and period.

We will only discuss the consequences of globalization (as defined above ) on DCsover the last two decades. Although there is much wider economic literatureavailable on the impact of globalization in developed countries, here we will onlyfocus on DCs .

Methodology.

While this subject may also be fruitfully studied from a historical, sociological,demographical or political viewpoint, here the adopted methodology will be onlyeconomic, with particular attention devoted to the applied approaches.

Scope.

Only some particular aspects of the social consequences of globalization in DCswill

be treated, namely the impact of increasing trade and FDI upon domesticemployment, within-country income inequality (WCII) and poverty reduction.

20


21/33

Impact on India

India opened up the economy in the early nineties following a major crisis that ledby a foreign exchange crunch that dragged the economy close to defaulting onloans. The response was a slew of Domestic and external sector policy measures

partly prompted by the immediate needs and partly by the demand of themultilateral organisations. The new policy regime radically pushed forward infavour of amore open and market oriented economy.

Major measures initiated as a part of the liberalisation andglobalisation strategy in the early nineties included scrapping of the industriallicensing regime, reduction in the number of areas reserved for the public sector,

amendment of the monopolies and the restrictive trade practices act, start of theprivatisation programme, reduction in tariff rates and change over to marketdetermined exchange rates.

Over the years there has been a steady liberalisation of thecurrent account transactions, more and more sectors opened up for foreign directinvestments and portfolio investments facilitating entry of foreign investors intelecom, roads, ports, airports, insurance and other major sectors.

The Indian tariff rates reduced sharply over the decade from aweighted average of 72.5% in 1991-92 to 24.6 in 1996-97.Though tariff rates wentup slowly in the late nineties it touched 35.1% in 2001-02. India is committed toreduced tariff rates. Peak tariff rates are to be reduced to be reduced to the

minimum with a peak rate of 20%, in another 2 years most non-tariff barriers havebeen dismantled by march 2002, including almost all quantitative restrictions.

The liberalisation of the domestic economy and theincreasing integration of India with the global economy have helped step up GDPgrowth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in1996-97. Growth rates have slowed down since the country has still bee able toachieve 5-6% growth rate in three of the last six years. Though growth rates hasslumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughtsin two decades the growth rates are expected to go up close to 70% in 2003-04. AGlobal comparison shows that India is now the fastest growing just after China.

This is major improvement given that India isgrowth rate in the 1970's was very low at 3% and GDP growth in countries like

21


22/33

Brazil, Indonesia, Korea, and Mexico was more than twice that of India. ThoughIndia's average annual growth rate almost doubled in the eighties to 5.9% it was stilllower than the growth rate in China, Korea and Indonesia. The pick up in GDPgrowth has helped improve India's global position. Consequently India's position in

the global economy has improved from the 8

th

position in 1991 to 4

th

place in 2001.When GDP is calculated on a purchasing power parity basis.

Globalisation and Poverty:

Globalisation in the form of increased integration though trade and investment is animportant reason why much progress has been made in reducing poverty and globalinequality over recent decades. But it is not the only reason for this oftenunrecognised progress, good national polices , sound institutions and domestic

political stability also matter.Despite this progress, poverty remains one of the most serious international

challenges we face up to 1.2 billion of the developing world 4.8 billion people stilllive in extreme poverty.

But the proportion of the world population living in poverty has beensteadily declining and since 1980 the absolute number of poor people has stoppedrising and appears to have fallen in recent years despite strong population growth in

poor countries. If the proportion living in poverty had not fallen since 1987 alone afurther 215million people would be living in extreme poverty today.

India has to concentrate on five important areas or things tofollow to achieve this goal. The areas like technological entrepreneurship, new

business openings for small and medium enterprises, importance of qualitymanagement, new prospects in rural areas and privatisation of financial institutions.The manufacturing of technology and management of technology are two different

significant areas in the country.There will be new prospects in rural India. The growth ofIndian economy very much depends upon rural participation in the global race.After implementing the new economic policy the role of villages got its ownsignificance because of its unique outlook and branding methods. For example food

processing and packaging are the one of the area where new entrepreneurs can enterinto a big way. It may be organised in a collective way with the help of co-operatives to meet the global demand.

Understanding the current status of globalisation is necessaryfor setting course for future. For all nations to reap the full benefits of globalisationit is essential to create a level playing field. President Bush's recent proposal toeliminate all tariffs on all manufactured goods by 2015 will do it. In fact it mayexacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or

22


23/33

less on all manufactured goods will be eliminated by 2005 and higher than 5% willbe lowered to 8%. Starting 2010 the 8% tariffs will be lowered each year until theyare eliminated by 2015.

GDP Growth rate:

The Indian economy is passing through a difficult phase caused by severalunfavourable domestic and external developments; Domestic output and Demandconditions were adversely affected by poor performance in agriculture in the pasttwo years. The global economy experienced an overall deceleration and recorded anoutput growth of 2.4% during the past year growth in real GDP in 2001-02 was5.4% as per the Economic Survey in 2000-01. The performance in the first quarterof the financial year is5.8% and second quarter is 6.1%.

Export and Import:

India's Export and Import in the year 2001-02 was to the extent of 32,572and 38,362 million respectively. Many Indian companies have started becomingrespectable players in the International scene. Agriculture exports account for about13 to 18% of total annual of annual export of the country. In 2000-01 Agricultural

products valued at more than US $ 6million were exported from the country 23% of

which was contributed by the marine products alone. Marine products in recentyears have emerged as the single largest contributor to the total agricultural exportfrom the country accounting for over one fifth of the total agricultural exports.Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and coffee are theother prominent products each of which accounts fro nearly 5 to 10% of thecountries total agricultural exports.

Where does Indian stand in terms of Global Integration?

23


24/33

India clearly lags in globalisation. Number of countries have a clear lead amongthem China, large part of east and far east Asia and eastern Europe. Lets look at afew indicators how much we lag.

Over the past decade FDI flows into India have averaged around 0.5% ofGDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into Chinanow exceeds US $ 50 billion annually. It is only US $ 4billion in the case ofIndia

Consider global trade - India's share of world merchandise exports increasedfrom .05% to .07% over the pat 20 years. Over the same period China's

share has tripled to almost 4%.

India's share of global trade is similar to that of the Philippines an economy6 times smaller according to IMF estimates. India under trades by 70-80%given its size, proximity to markets and labour cost advantages.

It is interesting to note the remark made last year by Mr. Bimal Jalan,

Governor of RBI. Despite all the talk, we are now where ever close beingglobalised in terms of any commonly used indicator of globalisation. In factwe are one of the least globalised among the major countries - however welook at it.

As Amartya Sen and many other have pointed out that India, as ageographical, politico-cultural entity has been interacting with the outsideworld throughout history and still continues to do so. It has to adapt,assimilate and contribute. This goes without saying even as we move intowhat is called a globalised world which is distinguished from previous erasfrom by faster travel and communication, greater trade linkages, denting of

political and economic sovereignty and greater acceptance of democracy asa way of life.

24


25/33

The Important Reform Measures (Step Towards Globalization)

Indian economy was in deep crisis in July 1991, when foreign currency reserves hadplummeted to almost $1 billion; Inflation had roared to an annual rate of 17 percent;fiscal deficit was very high and had become unsustainable; foreign investors and

NRIs had lost confidence in Indian Economy. Capital was flying out of the countryand we were close to defaulting on loans. Along with these bottlenecks at home,many unforeseeable changes swept the economies of nations in Western and EasternEurope, South East Asia, Latin America and elsewhere, around the same time.These were the economic compulsions at home and abroad that called for acomplete overhauling of our economic policies and programs. Major measuresinitiated as a part of the liberalisation and globalisation strategy in the early ninetiesincluded the following:

Devaluation: The first step towards globalization was taken with the announcementof the devaluation of Indian currency by 18-19 percent against major currencies inthe international foreign exchange market. In fact, this measure was taken in orderto resolve the BOP crisis

Disinvestment-In order to make the process of globalization smooth, privatizationand liberalisation policies are moving along as well. Under the privatizationscheme, most of the public sector undertakings have been/ are being sold to privatesector

Dismantling of The Industrial Licensing Regime At present, only six industriesare under compulsory licensing mainly on accounting of environmental safety andstrategic considerations. A significantly amended locational policy in tune with theliberalized licensing policy is in place. No industrial approval is required from thegovernment for locations not falling within 25 kms of the periphery of cities havinga population of more than one million.

Allowing Foreign Direct Investment (FDI) across a wide spectrum of industriesand encouraging non-debt flows. The Department has put in place a liberal andtransparent foreign investment regime where most activities are opened to foreign

investment on automatic route without any limit on the extent of foreign ownership.Some of the recent initiatives taken to further liberalise the FDI regime, inter alias,include opening up of sectors such as Insurance (upto 26%); development of

25


26/33

integrated townships (upto 100%); defence industry (upto 26%); tea plantation(upto 100% subject to divestment of 26% within five years to FDI); enhancementof FDI limits in private sector banking, allowing FDI up to 100% under theautomatic route for most manufacturing activities in SEZs; opening up B2B e-

commerce; Internet Service Providers (ISPs) without Gateways; electronic mail andvoice mail to 100% foreign investment subject to 26% divestment condition; etc.The Department has also strengthened investment facilitation measures throughForeign Investment Implementation Authority (FIIA).

Non Resident Indian Scheme the general policy and facilities for foreign directinvestment as available to foreign investors/ Companies are fully applicable to NRIsas well. In addition, Government has extended some concessions specially for NRIsand overseas corporate bodies having more than 60% stake by NRIs

Throwing Open Industries Reserved For The Public Sector to Private

Participation.

Now there are only three industries reserved for the public sector

Abolition of the (MRTP)Act, which necessitated prior approval for capacityexpansion

The removal of quantitative restrictions on imports.

The reduction of the peak customs tarifffrom over 300 per cent prior to the 30per cent rate

that applies now.

26


27/33

Effects of globalization

Globalization has various aspects which affect the world in several different wayssuch as:

Industrial- emergence of worldwide production markets and broader accessto a range of foreign products for consumers and companies. Particularlymovement of material and goods between and within national boundaries.International trade in manufactured goods increased more than 100 times(from $95 billion to $12 trillion) in the 50 years since 1955. Chinas tradewith Africa rose seven-fold during 2000-07 alone.

Financial- emergence of worldwide financial markets and better access toexternal financing for borrowers. By the early part of the 21st century morethan $1.5 trillion in national currencies were traded daily to support theexpanded levels of trade and investment. As these worldwide structuresgrew more quickly than any transnational regulatory regime, the instability

27
http://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/International_trade


28/33

of the global financial infrastructure dramatically increased, as evidenced bythe financial crisis of 20072009.

As of 2005-2007, the Port of Shanghai holds the title as the World's busiest port. Economic - realization of a global common market, based on the freedom of

exchange of goods and capital. The interconnectedness of these markets,however meant that an economic collapse in any one given country couldnot be contained.

Political- some use "globalization" to mean the creation of a worldgovernment which regulates the relationships among governments andguarantees the rights arising from social and economic globalization.Politically, the United States has enjoyed a position of power among the

world powers, in part because of its strong and wealthy economy. With theinfluence of globalization and with the help of The United States owneconomy, the People's Republic of China has experienced some tremendousgrowth within the past decade. If China continues to grow at the rate

projected by the trends, then it is very likely that in the next twenty years,there will be a major reallocation of power among the world leaders. Chinawill have enough wealth, industry, and technology to rival the United Statesfor the position of leading world power

Informational- increase in information flows between geographicallyremote locations. Arguably this is a technological change with the advent offibre optic communications, satellites, and increased availability oftelephone and Internet.

Language - the most popular language is Mandarin (845 million speakers)followed by Spanish (329 million speakers) and English (328 millionspeakers).

o About 35% of the world's mail, telexes, and cables are in English.

o Approximately 40% of the world's radio programs are in English.

o About 50% of all Internet traffic uses English.

Competition - Survival in the new global business market calls for improvedproductivity and increased competition. Due to the market becomingworldwide, companies in various industries have to upgrade their productsand use technology skillfully in order to face increased competition

Ecological- the advent of global environmental challenges that might besolved with international cooperation, such as climate change, cross-

boundary water and air pollution, over-fishing of the ocean, and the spreadof invasive species. Since many factories are built in developing countrieswith less environmental regulation, globalism and free trade may increase

pollution. On the other hand, economic development historically required a

28
http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932009http://en.wikipedia.org/wiki/Port_of_Shanghaihttp://en.wikipedia.org/wiki/World's_busiest_porthttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Languagehttp://en.wikipedia.org/wiki/Mandarinhttp://en.wikipedia.org/wiki/Spanish_languagehttp://en.wikipedia.org/wiki/English_languagehttp://en.wikipedia.org/wiki/Climate_changehttp://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932009http://en.wikipedia.org/wiki/Port_of_Shanghaihttp://en.wikipedia.org/wiki/World's_busiest_porthttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Languagehttp://en.wikipedia.org/wiki/Mandarinhttp://en.wikipedia.org/wiki/Spanish_languagehttp://en.wikipedia.org/wiki/English_languagehttp://en.wikipedia.org/wiki/Climate_change


29/33

"dirty" industrial stage, and it is argued that developing countries should not,via regulation, be prohibited from increasing their standard of living.

The construction of continental hotels is a major consequence of globalizationprocess in affiliation with tourism and travel industry, Dariush Grand Hotel, Kish,Iran

Cultural- growth of cross-cultural contacts; advent of new categories ofconsciousness and identities which embodies cultural diffusion, the desire toincrease one's standard of living and enjoy foreign products and ideas, adoptnew technology and practices, and participate in a "world culture". Some

bemoan the resulting consumerism and loss of languages. Also seeTransformation of culture.

o Spreading ofmulticulturalism, and better individual access tocultural diversity (e.g. through the export ofHollywood and, to alesser extent, Bollywood movies). Some consider such "imported"culture a danger, since it may supplant the local culture, causingreduction in diversity or even assimilation. Others considermulticulturalism to promote peace and understanding between

peoples. A third position gaining popuilarity is the notion thatmulticulturalism to a new form of monoculture in which nodistinctions exist and everyone just shift between various lifestyles interms of music, cloth and other aspects once more firmly attached to

a single culture. Thusly not mere cultural assimilation as mentionedabove but the obliteration of culture as we know it today.

o Greater international travel and tourism. WHO estimates that up to500,000 people are on planes at any one time. In 2008, there wereover 922 million international tourist arrivals, with a growth of 1.9%as compared to 2007.

o Greaterimmigration, including illegal immigration. The IOMestimates there are more than 200 million migrants around the worldtoday. Newly available data show that remittance flows to

developing countries reached $328 billion in 2008.

o Spread of local consumer products (e.g., food) to other countries(often adapted to their culture).

o Worldwide fads and pop culture such as Pokmon, Sudoku,NumaNuma,Origami, Idol series, YouTube,Orkut, Facebook, andMySpace. Accessible to those who have Internet or Television,leaving out a substantial segment of the Earth's population.

o Worldwide sporting events such as FIFA World Cup and the

Olympic Games.

29
http://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Travelhttp://en.wikipedia.org/wiki/Dariush_Grand_Hotelhttp://en.wikipedia.org/wiki/Kish_Islandhttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Consciousnesshttp://en.wikipedia.org/wiki/Consumerismhttp://en.wikipedia.org/wiki/Transformation_of_culturehttp://en.wikipedia.org/wiki/Multiculturalismhttp://en.wikipedia.org/wiki/Cultural_diversityhttp://en.wikipedia.org/wiki/Hollywoodhttp://en.wikipedia.org/wiki/Bollywoodhttp://en.wikipedia.org/wiki/Cultural_assimilationhttp://en.wikipedia.org/wiki/Travelhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Immigrationhttp://en.wikipedia.org/wiki/Illegal_immigrationhttp://en.wikipedia.org/wiki/International_Organization_for_Migrationhttp://en.wikipedia.org/wiki/Remittancehttp://en.wikipedia.org/wiki/Pok%C3%A9monhttp://en.wikipedia.org/wiki/Sudokuhttp://en.wikipedia.org/wiki/Numa_Numahttp://en.wikipedia.org/wiki/Numa_Numahttp://en.wikipedia.org/wiki/Origamihttp://en.wikipedia.org/wiki/Idol_serieshttp://en.wikipedia.org/wiki/YouTubehttp://en.wikipedia.org/wiki/Orkuthttp://en.wikipedia.org/wiki/Facebookhttp://en.wikipedia.org/wiki/MySpacehttp://en.wikipedia.org/wiki/FIFA_World_Cuphttp://en.wikipedia.org/wiki/Olympic_Gameshttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Travelhttp://en.wikipedia.org/wiki/Dariush_Grand_Hotelhttp://en.wikipedia.org/wiki/Kish_Islandhttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Consciousnesshttp://en.wikipedia.org/wiki/Consumerismhttp://en.wikipedia.org/wiki/Transformation_of_culturehttp://en.wikipedia.org/wiki/Multiculturalismhttp://en.wikipedia.org/wiki/Cultural_diversityhttp://en.wikipedia.org/wiki/Hollywoodhttp://en.wikipedia.org/wiki/Bollywoodhttp://en.wikipedia.org/wiki/Cultural_assimilationhttp://en.wikipedia.org/wiki/Travelhttp://en.wikipedia.org/wiki/Tourismhttp://en.wikipedia.org/wiki/Immigrationhttp://en.wikipedia.org/wiki/Illegal_immigrationhttp://en.wikipedia.org/wiki/International_Organization_for_Migrationhttp://en.wikipedia.org/wiki/Remittancehttp://en.wikipedia.org/wiki/Pok%C3%A9monhttp://en.wikipedia.org/wiki/Sudokuhttp://en.wikipedia.org/wiki/Numa_Numahttp://en.wikipedia.org/wiki/Numa_Numahttp://en.wikipedia.org/wiki/Origamihttp://en.wikipedia.org/wiki/Idol_serieshttp://en.wikipedia.org/wiki/YouTubehttp://en.wikipedia.org/wiki/Orkuthttp://en.wikipedia.org/wiki/Facebookhttp://en.wikipedia.org/wiki/MySpacehttp://en.wikipedia.org/wiki/FIFA_World_Cuphttp://en.wikipedia.org/wiki/Olympic_Games


30/33

o Incorporation of multinational corporations in to new media. As thesponsors of the All-Blacks rugby team, Adidas had created a parallelwebsite with a downloadable interactive rugby game for its fans to

play and compete.

Social- development of the system ofnon-governmental organisations asmain agents of global public policy, including humanitarian aid anddevelopmental efforts.

Technical

o Development of a Global Information System, globaltelecommunications infrastructure and greater transborder data flow,using such technologies as the Internet, communication satellites,submarine fiber optic cable, and wireless telephones

o Increase in the number of standards applied globally; e.g., copyrightlaws,patents and world trade agreements.

Legal/Ethical

o The creation of the international criminal court and internationaljustice movements.

o Crime importation and raising awareness of global crime-fightingefforts and cooperation.

o The emergence ofGlobal administrative law.

Religious

o The spread and increased interrelations of various religious groups,ideas, and practices and their ideas of the meanings and values of

particular spaces

Cultural effects

Japanese McDonald's fast food as an evidence of corporate globalization and theintegration of the same into different cultures.

Culture is defined as patterns of human activity and the symbols that give theseactivities significance. Culture is what people eat, how they dress, beliefs they hold,and activities they practice. Globalization has joined different cultures and made itinto something different. As Erla Zwingle, from the National Geographic article

titled Globalization states, When cultures receive outside influences, they ignoresome and adopt others, and then almost immediately start to transform them.

30
http://en.wikipedia.org/wiki/All-Blackshttp://en.wikipedia.org/wiki/Non-governmental_organisationhttp://en.wikipedia.org/wiki/Global_Information_Systemhttp://en.wikipedia.org/wiki/Global_telecommunications_infrastructurehttp://en.wikipedia.org/wiki/Global_telecommunications_infrastructurehttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Communication_satelliteshttp://en.wikipedia.org/wiki/Submarine_communications_cablehttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Copyright_lawhttp://en.wikipedia.org/wiki/Copyright_lawhttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/International_criminal_courthttp://en.wikipedia.org/wiki/International_Court_of_Justicehttp://en.wikipedia.org/wiki/International_Court_of_Justicehttp://en.wikipedia.org/wiki/Crime_importationhttp://en.wikipedia.org/wiki/Global_administrative_lawhttp://en.wikipedia.org/wiki/McDonald'shttp://en.wikipedia.org/wiki/Fast_foodhttp://en.wikipedia.org/wiki/All-Blackshttp://en.wikipedia.org/wiki/Non-governmental_organisationhttp://en.wikipedia.org/wiki/Global_Information_Systemhttp://en.wikipedia.org/wiki/Global_telecommunications_infrastructurehttp://en.wikipedia.org/wiki/Global_telecommunications_infrastructurehttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Communication_satelliteshttp://en.wikipedia.org/wiki/Submarine_communications_cablehttp://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/Copyright_lawhttp://en.wikipedia.org/wiki/Copyright_lawhttp://en.wikipedia.org/wiki/Patenthttp://en.wikipedia.org/wiki/International_criminal_courthttp://en.wikipedia.org/wiki/International_Court_of_Justicehttp://en.wikipedia.org/wiki/International_Court_of_Justicehttp://en.wikipedia.org/wiki/Crime_importationhttp://en.wikipedia.org/wiki/Global_administrative_lawhttp://en.wikipedia.org/wiki/McDonald'shttp://en.wikipedia.org/wiki/Fast_food

8/14/201

1. 2. 3. 4. 5. preface introduction

Documents