Gadget by The Blog Doctor.

Sunday, June 27, 2010

Positive Effects of Globalisation

In the first week of the Our World in Crisis? course, each group held a debate on Globalisation. The topic was "Globalisation is a good thing". I chose the affirmative because I thought it would be a more difficult issue to argue.

The first task was to define Globalisation.


Economic globalization refers to increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital. [1] It is the process of increasing economic integration between countries, leading to the emergence of a global marketplace or a single world market[2].

Or to put it another hopefully clearer way:

... the integration of national economies into the international economy, through the exchange of goods and services across national borders, the ownership of businesses and organisations in other countries, the movement of money internationally, the spread of modern technologies, particularly computer and communications products and the movement of people between countries.

Economic Globalisation Processes

A major element is the promotion of free trade. International free trade involves:

• elimination of tariffs; (ie a tax on imports) creation of free trade zones with small or no tariffs
• Reduced transportation costs, especially resulting from development of containerization for ocean shipping.
• Reduction or elimination of capital controls such as limitations on buying currency, taking currency from the country, taxing of monetary transactions
• Making intellectual property laws across the majority of countries similar
• International recognition of intellectual property restrictions (e.g. patents granted by China would be recognized in the United States

Arguments supporting Globalisation

The main advantages of Globalisation relate to free markets:

• It enhances the general economic welfare by allowing savings to be channelled to their most productive use.[17]
• By encouraging foreign direct investment it helps developing economies to benefit from foreign expertise.[17]
• Allows states to raise funds from external markets to help them mitigate a temporary recession.[17]
• Enables both savers and borrowers to secure the best available market rate.[4]
• When controls include taxes, funds raised are sometimes siphoned off by corrupt government officials for their personnel use.[4]

These processes haven’t always worked out the way the initial backers expected. Economic globalisation was initially pushed by Western Countries particularly the US, because they thought that it benefited them.

As Mark Thirlwell noted in a Lowy Institute publication called “Second Thoughts on Globalisation” :

It is the developed world that is now having second thoughts about
globalisation. [Although] discontent with globalisation is apparent in much of the developed World … most of the current re-evaluation of globalisation is being spurred not by its failures but by its successes, in particular the economic emergence of China and (to a lesser extent) India.

(Source here)

A criticism of Globalisation is that it disadvantages developing countries. Although there is some truth to this it has also led to the spectacular economic development of some undeveloped countries particularly China, India and Brazil. China has become the workshop of the world and consequently many hundreds of millions of people have been lifted out of dire poverty to a modicum of prosperity.

On a personal note: I first travelled to China in the early 1980s and noticed that the main method of transport was the bicycle. During my 2009 visit I noticed that most of the bikes had been replaced by motor scooters and that there was a large fleet of modern cars on the road.

This Chinese development is assisting other areas of the World. China is giving African countries more aid for Infrastructure that the IMF and World Bank combined, according to Joseph Stiglitz, Nobel Prize Winning Economist.

As an American foreign policy analyst, Deborah Brautigam, noted:

This is an opportunity for African states to ride into the global economy on China's shirt tails rather than remain natural-resource suppliers to the world.
(Source here )

Although economic globalisation has had some detrimental effects they are far outweighed by its advantages.

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