Economic Development in the Age of Globalization
Following topic and write a thesis-driven research paper utilizing a minimum of six academic
sources:
- Economic Development in the Age of Globalization
- What were the reasons behind the emergence of economic development policies?
- What were the consequences of these policies?
- How do economic development policies relate to developed countries like the United States?
5.How do they relate to developing countries like China, and the countries of sub-Saharan Africa?
Economic Development in the Age of Globalization
Introduction
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Globalization forms a very powerful aspect of the new systems in the world, which is a
representative of some of the most influential forces that are vital in the determination of the
planet’s future course. It presents itself in varied dimensions ranging from the economic
aspect to security, political, environmental, cultural, social, health, and educational spheres of
life, just to mention but a few. Currently, virtually all fields operate in an approach towards
‘globalization’; for instance, the educational sector has gone global, where the curriculum is
at the verge of being made uniform, while the health sector strives to incorporate cultural
competence (World Bank, 2012; and Basu, 2007).
This term has its origin dating back to the 1980s, yet the actual concept has been in
existence from a very long time ago, though depended on the interpretations of the respective
groups or people that existed then. Due to the varied perceptions of the term, it has had
equally varied reactions and attitudes, whereby some perceive it as a force meant to ensure
the world’s advancement, while others still, perceive it as a very dangerous theme to the
economic system of the world (Cyrus, 2010; Stiglitz, 2006; Sullivan, 2002). It is upon this
ground that this paper tries to analyse the various ways in which the economic development
with regards to globalization has impacted the various nations involved in interactions via
trade and the economic aspects such as Foreign Direct Investment.
Economic development entails the sustained, rigorous actions of the policymakers and
the various societies that help in the promotion of the economic health and living standard of
such a locality. This term originated from the post war period in around 1945, among the US
(Guo, 2011). The globalization of the world economy is, therefore, used to imply the increase
in the worldwide trade as well as exchange, characterized by a very open, cohesive and non-
boundary international economy. Such an exchange and trade has been characterized by a
marked economic growth, not just encompassing the ancient international trading of goods
and services, but also that which involves the exchange of technology, human resources
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through international migration and travel, currencies, capital movement, as well as the flow
and exchange of ideas and information (Cyrus, 2010). For instance, an analysis of the
currency market of New York which is characterized with over $1.2 trillion international
transactions in finance flowing through it every single day, whilst the volume of the
transactions of the international stock market per day exceeds the figure.
Several theories put across by several scholars point out that the developing and
undeveloped countries have at some point experienced growth in their economies, though
with very little or no any initiatives of economic development. For example, such nations
may have acted as sources of raw materials in the industries of the developed countries
(Deardorff, 2008). Such unconscious growth include the infrastructure that the economic
superpowers, while exploiting the economic resources in such nations, might have used.
After the Second World War, some nations quickly picked up and gained stability, leaving
behind others, to become global economic superpowers such as the US. In 1949, at the
inauguration of the U.S. president, Harry Truman, in the speech that he gave, he expressed
the need for prioritizing on the move towards the development of the undeveloped areas by
the West (Soloaga & Winters, 2005). His speech went:
“More than half the people of the world are living in conditions that are tending
towards misery, with their food being inadequate and falling victims of diseases. Their
economic life is primitive and stagnant. Their poverty is a handicap and threatens not
only them but the prosperous nations as well . . . make available to peace-loving people
the benefits of our store of technical knowledge . . . What we envisage is a program of
development based on the concepts of democratic fair dealing. Greater production is the
key to prosperity and peace . . .” (Soloaga & Winters, 2005, p.19)
This statement suggests that the globalization approach towards development is not a
theme that began yesterday, but an idea that has been in existence from the early periods even
before the world wars. It, however, was portrayed in the post-war period when the still-stable
nations such as the U.S., were giving aid to the nations weakened by the war, such as France.
In the period between the 1940s and 1960s, the United States of America played a very
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significant role in the promotion of industrialization in the developing countries under the
theory of ‘modernization’ (Stiglitz, 2006).
Such economic activities in those ancient periods were practiced mainly as a one-way
befitting activity in which the more advantaged nations would exploit the less advantaged
ones, through offering some very minor yet appearing to be very significant gains to the host
nations. This was the case during the colonial period, in which the colonialists gained too
much from the colonies, while in exchange claiming to bring a few developments in the
countries (Krueger & Lindahl, 2009). The continuation of this kind of relationship
encroached even into the independence period, whereby the same relationship still persisted
in the trade that developed between the minor nations and the developed ones.
Impacts of Globalization on the Economic Development of Nations
Through the globalization in the economic moves of the nations, has led to an
international economy characterized by high level of openness, attainment of an almost
borderless world and a worldwide basis integration of the markets, all of which have
facilitated the flow of goods and services between the nations (Cyrus, 2010). For instance, the
advances in technology have significantly led to a very dramatic lowering of the
transportation and communication cost, as well as the costs incurred in the processing and
retrieval of data from storage.
Through globalization, there has arisen the liberalization of trade as well as any other
form of economic aspect, which has led to dramatic reduction in the protections over trade,
thus, an advancement in the trading system of the world. The process began in the course of
the 20 th century, but was, however, interrupted by the Great Depression and the two World
Wars. This move then resumed by the end of the second world war through the trade
liberalization of ‘the-most-favoured-nation’ approach (Kaufmann, Kraay & Mastruzzi,
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2007). This approach is as laid down in the General Agreement on Tariffs and Trade
(GATT), which has in the present been revised to come up with the World Trade
Organization (WTO). Due to this move, the trade on goods and services barriers and the
tariffs has significantly been reduced.
The other aspects are the increased capital movement as well as the other factors of
production. Economists, however, argue that the current approach to trade under the theme of
globalization is just a return to a little more than the late nineteenth century and the beginning
of the twentieth century world trade. This is on the grounds that at that period, the borders of
nations were relatively open characterized by significant international flow of capital as well
as the movement or migration of persons since this period was characterized by the European
nations being so critically dependent on the trade under the colonial system (Kee, Nicita &
Olarreaga, 2005). A significant difference that exists between the trades in the globalization
impacted world and the nineteenth century is the technological exchange that is there today
and the educational exchange which did not exist then (Berri, 2004). The personnel exchange
mainly has the difference from the 19 th century in the sense that then, it mainly consisted of
the shipment of the blacks who were unskilled with an aim of providing labour in the whites’
farms, yet today, the human resource exchange is mutual, with the transfer mainly involving
the skilled personnel .
The Economic Development Policies
These are the laid down set of guidelines and regulations that are used in the monitoring
trade between nations with an aim of ensuring peaceful operations, through the reduction of
tariffs and trade barriers to help ensure a worldwide equitable development and advancement.
Such policies mainly emerged due to the realisation of the need for interdependence between
the nations as well as the realization that some trading partnerships involved some operations
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characterized by exploitation of the minority and less advantaged trading partners (Stiglitz,
2006).
Impacts of Liberalisation on the Participating Countries
From the perspective of trade, there are very significant disparities that exist between
the developed and the developing countries as far as the theme of globalization of economic
development in terms of trade fair and exchange is concerned. This comes out on the grounds
of the respective counties’ needs for the trading activity that pools them together, since the
requirements must be different in any form of trade for it to be existent (Pugel, 2004).
Whereas some may argue that the trade between the countries of diverse capital base is
mainly characterized by the exploitation of the less endowed nation capitally, there are others
who argue otherwise on the grounds of the reliance on the less developed country on the
developed country for aids such as donations, infrastructural development and even
technological exchange (Guo, 2011). However, a point to note is that the participating nations
that are involved have very mutual gains depending on the aim of their trading partnership.
The impacts of the economic development policies on the developed countries
In order to view the causes for the interests of the developed countries in the
liberalization and globalization of trade, there is the need to concentrate the assessment on the
effects of the trade on the exports of such a nation. In consideration of this, the newly
industrializing nations (NIC) are the most impacted as they account for the greatest
percentage the exports of the developed countries that are produced from the imports from
the developing nations. Such nations have the developing countries acting as their greatest
export base, while at the same time they get most of their raw materials from the developing
nations through a liberalized trade system (Easterly, 2005).
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The developed countries, as argued by most scholars, maximize the relationship
between them and the developing nations in the sense that they get the maximum benefit
from the trade relationship (Filippini & Molini, 2007). Notably, the developed nations that
are so actively involved in the trading activities with the developing nations are those that are
classified under the newly industrializing countries (NICs). The existence of the non-tariff
barriers characteristic of the developed countries poses the most challenge to the fellow
developed countries involved in the industrialization. The developed countries, however,
mainly gain from such a relationship by the acquisition of market for their finished goods,
and not much thereafter. Such nations, thus, in the cooperation tend to maximize so much so
as to ensure realisation of full potential.
The impacts of the economic development policies on the developing countries
The year 2005 was characterized by the introduction of the Trade and Development
Index in the developing countries mainly as a way of assessing and formulating of policies in
such countries. This was based on the grounds that it outlines a framework used in the
enhancement of the provision of an environment that encourages trade and exchange in the
context of globalization. The analysis of a nation through the use of the TDI framework helps
in the identification of the nation’s structural, financial, institutional, development and trade
policies that enable them to maximize on the gains while minimizing on the costs incurred
from the globalization and liberalization of trade (Stiglitz, 2006). This analysis helps such
nations to address the opportunities and challenges in the perspective of globalization that is
trade-driven. This framework also helps in the carrying out of studies based on comparison of
the performances of the countries in their respective areas of location.
Foreign Direct Investment
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According to Basu, 2007, through the use of the Foreign Direct Investment (FDI), the
developing countries are assured of employment of the citizens in such countries, for
instance, the gold firm in Johannesburg, South Africa, has its base in South Africa yet owned
by the U.S. the foreign direct investment also boosts the respective nation’s infrastructure
since such an investment will have to lead to development of the transport and
communication networks.
Informational exchange
The globalization of economic development leads to the free flow of information as
there is a lot of exchange in terms of technical know-how and skills between the nations that
are involved in the trade interaction (Soloaga & Winters, 2005).
Provision of market
The developing nations are mainly characterized by the exportation of unfinished
goods, that is, raw materials that are then used in the developed world to manufacture and
produce a fine processed product. This helps such nations increase their gross domestic
product GDP, as the trade ensures all the surplus are channelled to a market that in the end
earns the country income (Guo, 2011). Through the reduction of the tariffs by the developed
nations, the less developed countries will in turn have increased benefits as they would
increase their export of the food products and raw materials. In case of a removal of the
escalating tariffs, the LDCs will in turn export their products in a more processed form thus
an increase in the income from such exports (Harold, 2011). This, however, will on the other
hand lead to a reduction on the income gained from the NICs as they will not have too much
footloose processes to undertake, and instead will do very minimal, on the goods before
reselling them, or exporting.
Acquisition of goods
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The developing nations, upon the processing of the unfinished goods that they exported
as raw materials by the developed nations, then import them for their local consumption. This
relationship embraces a quite mutualistic approach in which, since the developing nations
may lack the technology and technical know-how required in the processing of such goods,
they export them, thus gaining, and in the end, import the products of such goods to help in
the satisfaction of the local wants (Kee, Nicita & Olarreaga, 2005). Through a proper trade
relationship, the nations involved in the trade may get into an agreement of exchanging the
goods at a subsidized prices, whereby the exporters of the raw materials do so at a subsidized
price, while in the end, they are charged lower for the import of such products.
Foreign aid
Most of the developing countries are so dependent on the aids from the developed
countries without which, most basic developments may become arrested. This, however, is a
discouraged approach to globalization and has been condemned by most of the humanitarians
and instead, a mutual international economic relationship should be fostered to ensure
independence of such nations and help eliminate the chances of neo-colonialism (Bovard,
2005).
Conclusion
The globalization of economic development has raised both negative as well as positive
perceptions depending on the group that is viewing the operations and the dimensions upon
which they are basing their arguments. Notably, the liberalization of trade and the
globalization of the economic development has led to increased exchange across
geographical and ethnical disparities, thus, ensuring increased capital base of the participating
nations. The policies laid down by the economic development policymakers and the trade
organizations such as the World Trade Organization (WTO), IMF, and the World Bank
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amongst others, have helped the nations that could otherwise suffer at the fangs of the hungry
nations that are at vantage positions to exploit others.
References
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Basu, SR., 2007. A new way to link development to institutions, policies and geography.
Policy Issues in International Trade and Commodities. UNCTAD, New York and
Geneva, forthcoming.
Berri, David J. (May 24, 2004). Power point slides 2: historical economic growth. The
development of the American economy. California state university – Bakersfield.
