The Business Environment
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There are gains and risks of economic globalization. Globalization can be defined as increase international contact in economic activities, culture and people (Held 2007, pg 1). This term can also be used to refer to the worldwide flow of popular culture, thoughts and languages. When applied in the economic context the term then refers to economic globalization. Economic globalization according to the United Nations ESCWA refers to decrease and exclusion of trade barriers between and among states (Eclac: 2002. pg 10). These barriers might be in form of in terms of quotas, tariffs or export fees. The exclusion and decreasing the trade barriers is meant to enhance movement of goods, services, labour and capital among nations. This paper seeks to explain the gains and risks of Strinidal a country with an average per ca of $ 2000 at market exchange and having a population of 40 million with 14 million living in urban areas. Moreover its major0 exports are raw materials including a small amount of oil.
Strinidal according to the listings of the UN is slightly above least developed countries. These are countries with have an average per capita of $905. To transit from this level a country must have an average per capita of $ 1,086. Strinidal is therefore a good example of a developing country. These are countries with per capita more than $ 1,086. According to the IMF report on globalization of 2000; this countries have most of their exports as raw materials and foods (Eclac: 2002. pg 98) Strinidal with an average per capita of $ 2000 and exporting majorly raw material and a small amount of oil fits well in this category of developing countries.
Gains globalization for Strinidal
The IMF 2000 report states that globalization has four main aspects that is trade, movement of labour from one country or continent to another, foreign direct investment, movement of knowledge ideas, thoughts, technology and also flow of capital investment% (IMF, 2000).
Globalization leads to knowledge transfer (Eclac: 2002. pg 98). The knowledge transfer can be in terms of technical knowledge transfer, democracy which leads to the transformation of societies. This knowledge can also be about available opportunities in the market. Knowledge about good policies which led to success of other countries can be acquired in Strinidal through globalization. Importing good governance from the global world can attract foreign direct investment (FDI) the same way it worked for those countries. From a global perspective we can learn that bribery and other malpractices in the developing countries have affected foreign direct investment negatively and thereby a void such practices.
Another knowledge transfer that can be of help to Strinidal from the global world is transparency in governments. This fact will help the country to develop because transparency in government businesses attracts investment inflows from global mutual funds like IMF and World Bank. Technological transfer is a primary feature of globalization. Technological and innovate transfer from other countries such in the fields of information (development of mobile phones, computers and other electronics) can greatly boost Strinidal economy. Globalization also opens up greater export markets therefore earning the country foreign exchange (Baffour, A, 2011,pg 138).
Moreover, IMF and World Bank reports states “free movement of labour in the globalised world will help Strinidal Company in several ways”. It can help Strinidal to obtain productive labour. The gains from the productive labour according to the report are higher than the income paid to the individuals. The difference in the salary paid and money earned from the labour generates income to these countries. Furthermore allowing labour flow from a less developed country to a more developed country is beneficial. This is because it leads to knowledge and skill impartation to the workers (Eclac: 2002. pg 102). When this labour force comes back home they are able to use the new skills hence will be beneficial to Strinidal.
The other aspect of globalization that will be beneficial to Strinidal is the direct foreign investment. This is because when foreigners invest in industries they create employment opportunities to citizens in Strinidal thereby improving their living standards. The last gain Strinidal will accrue from globalizing is through capital market liberalization. From the World Bank research Gao, (2000, p140) non-globalizing developing nation’s yearly rates of growth dropped from 3.3% to 1.4% in 1970s to 1990s respectively. Developing countries pro globalization on the other hand had an increase of 1.4%, 2.9%, 3.5%, and 5.0% in 1960s, 1970s, 1980s and 1990 respectively.
Risks of deeper globalization for Strinidal
Despite the many gains for the Strinidal on globalization there are many risks in the various aspects of globalizing. Involvement in globalization in the developing countries increased from 19%-29% between 1971 and 1999. However the only beneficiaries of the involvement in globalization were the developed and newly industrialized countries, (Gao, 2000,p140). The developing countries like Strinidal lost in the long run and therefore its involvement in international trade is questionable if it cannot bear fruits.
Moreover instead of depending on aids from developed countries, developing countries such as decided to open their doors for direct foreign investment especially in the 1990s. Nevertheless FDI’s have become so much unstable and unpredictable hence cannot be relied upon in investment. World Bank and IMF allege that movement of labour movement from areas where there is low skilled area to high skilled area will help in reinvestment due to introduction of new skills and ideas. But the truth of the matter is that has not always been the case. Many of the workers who go to work abroad rarely do not reinvest back nor do they come back to their countries to offer the new knowledge and skills they acquired. This may be because of the high cost of living in the foreign countries which may force them to live from hand to mouth.
According to the policy modeling journal, trade liberalization has led to increasing rates of interest of global loans. Stricter monetary rules have made it almost impossible for developing countries to invest in developed countries such America. As a result it is only developed countries who invest in developing countries hence reap profits at the expense of developing countries. Therefore trade liberalization is not meant for the benefit of the poor countries but for the rich countries such the United States. Capital market freedom is another globalizing aspect. Research by Gao, (2000, p140) has indicated that capital market liberalization is mostly associated with currency and financial crisis. When such crisis takes place a country is forced to mobilize its domestic funds to address the situation thereby slowing growth by going against a country’s budget.
Capital market liberalization has also the effect of making countries to give up their control of exchange rate and monetary guidelines. This has great implication on other countries economic growth especially when there is world financial crisis. The effect is disabling domestic financial institutions such as banks have been functionally and competitive wise. This is because national financial institutions cannot compete international institutions such as World Bank.
Furthermore when countries have debts they have to deposit debt reserves equal to the short term debts with United States. This leads to capital flight. The given money is unavailable to these countries but for United States. This is disadvantageous to the countries getting the loan because the reserved money could have been used for investment. United States on the other hand does business with this money and makes profits via its banks. It is estimated that America makes profit of $ 14 million using this money. The other undoing for the developing countries is the high interest rate of 18% (IMF, 2000).
Political globalization was meant to advance good and acceptable ethics in politics. This was supposed to be transfer of information on the best ways of leadership. The philosophies supported as a bench mark for good governance were sovereignty and independency. Furthermore governments were supposed to embrace democracy. However in many developing countries such as Nigeria’ Sierra Leone and Congo there has been a lot of political interference by international organizations such as World Bank. These organizations control these countries because of the presence of valuable minerals in these countries. They therefore involve themselves in corruption to win concessions, and get access to the minerals e.g. fuel. This has lowered economic growth in the developing countries.
Globalization has also led to the destruction of the traditional culture and tainted the image of employers. The IMF proposed radical policies adopted by many countries in the world (IMF, 2000). During the economic turmoil this global organization proposed laying off of many workers mercilessly. This was breaking from many traditional norms of being fair.
Difference in globalization in rural and urban areas in Strinidal
Globalization has affected many areas of people’s lives such as culture, trade, technology among others. Nonetheless there is a difference in degree of the effect of globalization in Strinidal in urban and rural areas. The effect is far much greater in the urban center than the rural areas. For example in terms of technology the urban areas are more technologically advanced than the rural areas. The urban folk access the internet and are more conversant with the use of mobile phones than the rural folk. In terms of culture people living in the urban areas are more preserved and traditional in terms of their dressing. The urbanized people have integrated other people’s way of dressing by watching their television and interaction they have aped other peoples culture (Baffour, A, 2011, pg 151).
It will be biased to conclusively say that Globalization is bad. Globalization has its advantages and disadvantages. However for developing countries such as Strinidal it is not prudent that it opens its gate entirely to globalization. We have seen that globalization to a greater extent favors developed countries. Furthermore the developed and international organizations have always made use developing nations as a stepping stone in achieving their goals in the global and free market economy.
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