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Advantages And Dangers Of Globalization For Developing Countries
Published: 23rd March, 2015
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The twenty-first century is enormously marked by increased tendency towards globalization instead of nationalization. This is applicable to most ramifications of human activities, such as industry, trade and finance. Global policies that emphasise networks and solutions as against controls within national boundaries are influenced by liberalization, improved technology, giant leaps in communication and other environmental factors; the incidence of which can be seen in economic interactions. Shenkar and Luo (2007:2) "define globalization as the acceleration and extension of interdependence of economic and business activities across national boundaries."
Generally, globalization implies that activities and factors local to other parts of the world have effects on other parts of the world, as a result of integration of national economies. While globalization generally generate more choices and cheaper prices via free trade, the effect of free trade and integrated national economies are accompanied by relative advantages and dangers for developed, upcoming and developing economies. Such advantages arise from motivations for globalization, such as the mercantilist doctrine, Laissez-faire theory, comparative advantage theory, etc., while the dangers are functions of modern political, economic, environmental, and social dynamics, expressed in Human Skills and Technology-based Views, product Life-Cycle model, etc.
ADVANTAGES OF GLOBALIZATION TO DEVELOPING COUNTRIES:
According Sachs (1998), globalization presents the best chance for developing countries to grow and develop economically. Globalization creates conditions conducive for global capitalism and democracy, while fuelling economic grow. Such advantages include but not limited to:
Increased Employment and better living standards:
Globalization increases trade, which gives rise to increased financial flow that theoretically implies increased capital injection and redistribution. If such capitals are properly invested, it is bound to alleviate poverty by creating employment and instigating better living standards.
Improved Wages for Local Community:
Globalization promotes international trade through Multinational Enterprises (MNE). Such organizations, while leveraging lower labour costs tend to improve wages, which creates greater motivation for local work force when "a globally unified compensation system for employees" (Shenkar and Luo, 2007:9) is maintained.
Increased Financial Flow:
Globalization reduces control over local economies. In recognition of this effect, the global community assume greater responsibilities. For instance the International Monetary Fund (IMF), World Trade Organization (WTO), and the World Bank are international organizations that streamline and facilitate financial, commodity, labour and information flow.
The IMF is known to have provided last resort loans to developing countries. In 1986, the IMF provided loans to Nigeria for industrial development. Such loans are usually accompanied by stringent structural Adjustment programmes aimed at alleviating indebtedness and depression, by boosting the economy.
DANGERS OF GLOBALIZATION TO DEVELOPING COUNTRIES:
Dangers of globalization generally draw from advantages of globalization, since policies advantageous to one country may constitute setback to another. When we group developed and developing countries, a pattern emerges that offers more advantages to developed countries than developing ones, such as:
According to WTO, dumping involves selling products at unfairly low prices. Globalization tends to increase commodity dumping in developing countries where there may be inadequate infrastructure and/or limited Know-how to efficiently produce similar products by local industries.
For instance, China uses her abundant low cost labour and technological know-how to produce cheap goods such as toys and apparels with which markets in developing countries are flooded. This results in trade distortion. Shenkar and Luo (2007) notes that developing countries such as Nigeria become "digital dumps" for discarded and unserviceable computers and monitors, most of which are beyond repair.
Threat to Local Industries:
Globalization also constitute threat to local industries of developing countries. This is because most local industries in developing countries lack the knowledge, skills and resources to produce products that would compete with similar products produced in developed countries.
For instance, Nigeria is fraught with chronic, epileptic power supply. Thus factories are forced to rely on power generating set, which would have to be fuelled. Diesel and gasoline are not cheap, added to maintenance costs combine to reflect on commodity prices. Such disadvantages offset the advantage of low labour cost. This makes it extremely difficult for developing countries to compete with their foreign counterparts in a global market.
In Developed countries there are usually stringent regulations on environmental pollution. This is usually as a result of greater awareness and education. Globalisation have made it easier for manufacturers to relocate manufacturing facilities to developing countries where there are highly relaxed environmental laws and monitoring standards. This results in degradation of local environment with attendant health issues for developing countries.
SEIZING THE OPPORTUNITIES OF GLOBALIZATION:
Political Stability and Better Regulations:
Developing countries should strive for political stability and better regulations. Such environment will ensure transparency that will attract foreign investors from developed countries. Such investments will help pull developing countries from impoverishment. Fisher and Cox (2006) notes that countries with higher economic and political stability, better regulations and less corruption rank high on the globalization index.
Greater attention to education will position developing countries with greater ability to close the imitation lag, or even become innovators. This will help reduce export monopoly by developed countries and the attendant technology gaps, (Hufbauer, 1966).
Increased professional skills and capable human resources can favourably position developing countries in global trade and afford them greater opportunities to leverage advantages of globalization. This agrees with Human Skills and Technology-Based Views, which added two new factors of production "to the explanation of comparative advantage sources" Shenkar and Luo, 2007:26)
MINIMIZING THE DANGERS OF GLOBALIZATION:
Tariffs: Developing countries can minimise the dangers of globalization using selected and carefully implemented Tariff and Nontariff trade barriers. For instance developing countries can implement tariff regimes that protect local and upcoming infant industries and encourage such industries to develop, by gradually removing such barriers over specified time. This will enable such industries to better equip and adjust themselves for international competition over time.
Regulations: The implementation of policies that will control, yet optimize the inflow and outflow of funds. For instance poor oil producing countries like Nigeria can pass laws that make it mandatory to repatriate funds received from crude all sales back to Nigeria, remain for specified time, before it is moved back the country of origin of international investor. Developing countries can also regulate the amount of money that can enter or leave the country in a particular day.
Transnational framework: Developing countries should pursue international frameworks that promote representation of developed and developing nations, as against existing industrialized-nations-only model, to promote the interests of developing nations.
From the above, we see that while globalization has far reaching advantages for developing countries, it is also a source of certain dangers. However, carefully crafted policies would enable developing countries to avoid associated dangers while leveraging and maximizing attendant opportunities associated with globalization.