Globalization


Globalization is both an active process of corporate expansion across borders and a structure of cross-border facilities and economic linkages that has been steadily growing and changing as the process gathers steam. “This process sows the seed of its own destruction, as it serves a small global minority, damages the majority, breeds financial instability, and exacerbates the environmental crisis. Its destructive tendencies are likely to produce an explosion if the process is not contained and democracy is not rehabilitated” (E, Herman. http://www.globalpolicy.org/globaliz/define/hermantk.htm). The debate over the threat of globalization is increasingly controversial and has many opposing it. It is evident that in some cases, globalization has led to an increase in poverty and a decline in the productivity and investment growth of countries, yet in countries such as China, India, Mexico and Vietnam this does not seem to be the case, with increases in wages and production and a decline in poverty. Globalization is a messy process that requires adjustment but the evidence shows integration offers powerful net benefits for developing countries. This paper will discuss the history of globalization, globalization will be defined and the effects had on the world’s economy will be analyzed. The influence on, and the regulation of globalization by international institutions such as the World Bank and World Trade Organization will also be addressed shedding light on how more recent forms of globalization arose and how it has been managed.


“Societies and economies around the world are becoming more integrated. Integration is the result of reduced costs of transport, lower trade barriers, faster communication of ideas, rising capital flows, and intensifying pressure for migration” (The World Bank. 2002, 1). Integration, or globalization, has generated anxieties about rising inequality, shifting power, and cultural uniformity. Some, but not all of these anxieties are well founded. Globalization generally reduces poverty because more integrated economies tend to grow faster and this growth is usually widely diffused. As low-income countries break into global markets for manufacturers and service, poor people can move from the vulnerability of grinding rural poverty to better jobs, often in towns or cities. In addition to this structural relocation, integration raises productivity job by job. Workers with the same skills, be they farmers, factory workers, or pharmacists, are less productive and earn less in developing economies than in advanced ones. Integration reduces these gaps.


Globalization also produces winners and losers, both between countries and within them. Between countries globalization is now mostly reducing inequality. “About 3 billion people live in “new globalizing” developing countries. During the 1990s this group grew at 5 percent per capita compared to 2 percent for the rich countries. The number of extreme poor (living on less than $1 per day) in the new globalizers declined by 120 million between 1993 and 1998” (The World Bank. 2002, 2). However, many poor countries, with about 2 billion people, have been left out of the process of globalization. Many are becoming marginal to the world economy, often with declining incomes and rising poverty. Clearly, for this massive group of people, globalization is not working. Some of these countries have been handicapped by unfavorable geography, such as being landlocked and prone to disease. Others have been “handicapped by weak policies, institutions, and governance; yet others by civil war” (The World Bank. 2002, 2). Reducing poverty in these areas will require a combination or policy reform to create a better investment climate; development assistance to address problems of education and health; and out-migration to more favorable locations, both within and across national boundaries.


“Participation in an expanding global market has basically been a positive force for growth and poverty reduction in developing countries, which is why so many countries have become more open to foreign trade and investment” (The World Bank. 2002, 18). The list of post 1980 globalizers includes some well-known reformers such as Argentina, Brazil, China, Hungary, India, Malaysia, Mexico, the Philippines, and Thailand. “These countries have moved ahead on a wide range of reforms involving trade and investment liberalization, stabilization where necessary, and poverty rights reforms in the transition economies such as China and Hungary” China’s initial reforms in the late 1970’s focused on the agricultural sector and emphasized strenghthening property rights, liberalizing prices, and creating internal markets, most of which had little to do with foreign trade and