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Globalisation involves the interplay of markets, technology and State, which are amongst

the oldest and most distinctive human innovations. Exchange, the fundamental principle
on which markets are organised, is known to exist in the most primitive human societies.
Man is not the only living creature with the ability to store surpluses and live in complex
societies controlled by chiefs consider the industrious ants and bees but he is
uniue in his ability to socially redistribute these surpluses through increasingly complex
divisions of labour under the authority of the State.
!he saga of globalisation is that of an unbound "rometheus, with surges in productivity
and growth unparalleled in history as markets, technology and states are progressively
freed from local demand and supply constraints. #lthough the term $globalisation% has
gained currency only recently, the forces driving this trend can be traced back to the end
of the Middle #ges in Europe.
"re&modern societies, however, were above all else defined by localism and
decentralisation. Most people remained at their place of birth right through their lives.
Migration was a one&way street to resettle in virgin territory in response to conuest,
calamity or local demographic pressure. 'eligious experience was mostly limited to the
local parish, with wider pilgrimages limited to a select few. Empires meant mostly march
of armies over land, and were never transcontinental, with the notable exception of (orth
#frica ad)oining the Mediterranean. State power was a coalition of local power elites
owing allegiance to a monarch who never had access to centralised administrative
machinery.
*ith near universal poverty a structural constraint on demand, markets were
neighbourhood&trading places, with long distance trade mostly limited to luxury goods
for the small power elite. (ew ideas, information and technology spread slowly since
transportation and communication were based on animal traction. +our distinct phases of
globalisation can be discerned in modern history. !he first phase began in the sixteenth
century with the passing of pre&modern localism, improvements in maritime technology
leading to the great age of maritime exploration, discovery and mercantilism, the
European 'enaissance, centralising tendencies associated with absolute monarchy and
the emergence of modern nation states following the "eace of *estphalia of ,-./, and
the spread of the ideals of the #merican and +rench 'evolutions from the eighteenth
century.
!he second phase from the late eighteenth century was marked by the spread of the
0ndustrial 'evolution and vast improvements in human technology, inanimate traction,
productivity and demand, which led to mass production and conveyance of merchandise
goods and people, cross&border integration through bulk long&distance trade, colonial
plunder, investment flows and empire during a phase of European imperial expansion
which saw the flag follow trade across the globe. !he 0ndustrial 'evolution opened up a
rapidly widening income gap between Europe and #merica on the one hand, and the rest
of the world on the other.
!he globalising trend was halted by the two great wars of the twentieth century, and an
$autarchic% anti&imperial $nationalist% interlude, which actually saw a decline in
international trade and capital flows as a percentage of global G1". Even as trade and
flags disengaged, the per capita income between developed countries and the erstwhile
colonies continued to diverge.
1uring the third phase, merchandise trade resumed its triumphant march as the engine of
hyper growth in East #sia from the ,234s. 0nternational trade5G1" ratios recovered to
their late ,2th century level by the last decade of the 64th century. 7ut whereas the
globalisation thrust in the second phase in the nineteenth century involved, in the main,
the export of mass&produced merchandise to the colonies, this time round the export
dynamism came from the erstwhile colonies. !his globalisation thrust was led by trans
national corporations 8!(9s: that endeavoured to disseminate international trade and
modern technology to every flag on earth.
Globalisation arguably entered a frenetic fourth phase from the end of the twentieth
century, in which developed and developing countries are becoming more eual partners
in the flow of cross border trade and investment, as per capita income between the
developed world and the developing world rapidly converge, galvanised by the
awakening of the ancient sleeping giants, 9hina and 0ndia.
Merchandise trade is being swamped by $invisible% trade in services led by rapid
technological advances in information technology, and volatile capital flows, that have
become new engines of growth redefining human interface and old nation&state based
economic, social, cultural and political paradigms. 9ontradictions between !(9s and
sovereigns are growing in several areas such as trade, investment, labour, agriculture and
infrastructure policies. (ation states, in the form they emerged in the early modern
period, are losing their raison d%;tre as they are increasingly constrained in the conduct of
foreign policy in a unipolar world where conventional war is yielding to stateless conflict
and terror< resolving the intertwined energy&food&security crisis< freeing resources for the
intertwined ageing&health&welfare crisis< further extending the welfare benefits of trade<
and use of time&tested macro&economic fiscal and monetary tools to manage external
shocks.
!he globalising impulse can be seen as ever&widening circles trending towards greater
homogeneity, from locality, to nation states to regional identities like pan European, pan&
#sian, "an&#rab and pan&#merican, the long&term logical corollary of which is a unified
market, a unified culture, a unified language, a unified liberal&democratic state, or what =
S (aipaul famously termed a universal civilisation. 'apid strides in information
technology are spawning new virtual relationships, cosmopolitan identities and
communities that compete and conflict with those forged within the confines of the nation
state. !he interesting issue, however, is whether this process of $cultural entropy% would,
over the long run, abate the clash of civilisations underscored by a long line of eminent
historians from >erodotus to #rnold !oynbee to Samuel >untington.
!hanks to the 6?&year old #bhinav 7indra, 0ndia can finally celebrate the winning of its
first individual @lympic gold medal -, years after 0ndependence. >owever, it would be
premature to infer, as some != news&channels are doing, that the winning of the first
individual gold medal means that an @lympic culture has finally taken root in 0ndia. 0n
fact, during his interaction with the media after striking gold at 7ei)ing in the ,4m air&
rifle event, #bhinav himself pointed out that A@lympic sports is not given priority in
0ndiaB.
#gain, the first person to embrace #bhinav after his gold&medal winning feat was his
Swiss coach Gabrielle 7uhlmann, who had participated in the ?4m air&rifle event at the
644. @lympics. #bhinav has been doing most of his training in Germany, where he had
earlier shot for clubs in the professional league to pay for a full&time coach. #n @lympic
shooting gold reuires not )ust marksmanship but perfect control over muscle tension,
breathing and trigger&pressure since even the slightest twitch could turn a medal into
dustC
Granted, #bhinav%s initial success in winning the national championships at the age of ,?
was due to his talent and the encouragement by an affluent father. >owever, in the year
644,, he estimated that converting a prodigy into an @lympic gold medallist would
reuire an investment of 's ,.64 crore, including 's D4 lakh for participation in
competitions abroad, 's 64 lakh for a coach and training, and 's ,. lakh for special food
supplements and a mental&management course at the institute in !exas. #bhinav had
reached the finals at the Sydney @lympics.
!his time around, the funding constraint has been somewhat eased for 0ndian @lympians
with the Mittal 9hampions% !rust an initiative by steel tycoon Eakshmi Mittal
chipping in with F,4 million and with former badminton and billiards champs "rakash
"adukone and Geet Sethi setting up an @lympic Gold Guest +oundation respectively.
7indra%s gold shows how globalisation can take a relentless individual uest for
excellence to the pinnacle of international sporting success.
On October 29, John Chambers, chairman and CEO of the $34.9-billion Cisco, will
begin his fifth visit to ndia. Chambers, who had alread! committed $"." billion
investment for ndia two !ears ago, sa!s he has even more ambitio#s $lans for the
co#ntr!.
%he technolog! giant has a large &'( $resence in )angalore where it set #$ a
*lobalisation Centre East last !ear. n an email interview with E%, Chambers sa!s that
b! 2+"2, 2+, of its to$ global leaders will be based in ndia. E-cer$ts.
!he Globalisation 9entre East of 9isco has already made its presence in 7angalore. !ell
us about your experienceH
*e look at 0ndia not as an opportunity to save labour costs but as a true partner and the
platform for our globalisation efforts. !he hallmark of 0ndian business, government and
cultural leaders & and the reason why we are so committed to 0ndia & is the willingness of
0ndian leaders to partner closely.
!his partnering mentality, combined with the assets of 0ndia%s strong education system,
commitment to maths and science, and supportive government, make us very optimistic
about 0ndia%s future growth and success. 0n the next few decades, we expect many great
global companies to come from 0ndia. 9isco will use its new globalisation centre to
create new go&to&market channels, markets, processes and technologies.
9isco 0ndia has seen considerable churn in its 9E@s in the last ,/ months. 1o you think
there is stability nowH #nd has the 0ndian market lived up to 9isco%s expectationsH
*e have always believed in developing and nurturing a deep leadership bench. 0 expect
my teams to continually bring in new leaders who offer new insight, different strengths,
and innovative ideas. #s our operations continue to develop in 0ndia, 0 expect our
leadership team to continue to evolve and grow.
*e have had, and continue to have, an excellent team there & and, in fact, by 64,6, 0
expect 64I of my top global leaders to be based in 0ndia. *e have experienced smooth
transitions as our leadership teams have evolved, and 0 am very happy to have a capable
leader like (aresh *adhwa to take 9isco 0ndia to its next wave of growth.
9isco has been constantly talking about internet protocol 80": as the backbone platform to
deliver a multitude of services and solutions. *hat are the aspirations and challenges for
9isco in implementing this in a developing market like 0ndiaH
*ith no legacy infrastructure, 0ndia has the potential to leapfrog developed nations in
technology adoption and innovation. 9isco partners with many developing nations across
the globe, and we have great confidence in 0ndia%s ability to develop an 0" backbone to
deliver services that can transform the way people work, live, play and learn. 0ndia%s
potential is great, with a buoyant economy and a country that believes strongly in the
transformative power of technology.
9isco is working closely with ma)or companies across 0ndia to develop business and
technology strategies for delivering these services.
*hat do you think about #sian50ndian managersH
9isco is trying to achieve what no other company in the high&tech industry has achieved.
*e have the opportunity to be the global leader in communications and 0! and we can
only achieve this position with a leadership team that can execute together. @ne of
9isco%s core competencies has been to evolve our organisation and leadership teams
while still maintaining focus on our execution, and implementation of our strategy.
0ndia has a strong talent base in engineering & excellent for our global technical resource
hub. *e plan to continue to develop this talent at every level especially since 64I of our
top talent will be based in 0ndia at some point in the near future.
(E* 1EE>0J 0nternal auditors of corporates in #sia&"acific region need to adopt a new
approach towards risk management in their organisations to keep with the new trends
such as globalisation and technological advances, among others, a latest "w9 report says.
0nternal audit refers to the ongoing appraisal of the financial health of a companyKs
operations by its own employees before the final audit of the companyKs balance sheet.
!wo new reports released by "ricewaterhouse9oopers 8"w9: & 0nternal #udit 64,6 and
0nternal #udit 64,6 #sia&"acific Supplement & have identified ma)or trends that are likely
to shape the world of internal audit over the next five years.
!he trends include globalisation, changes in risk management, advances in technology,
talent and organisational issues and changing internal audit roles and expectations.
LGlobalisation and exponential growth are changing the competitive landscape for
companies. *e see a concern expressed by senior management and audit committees
with respect to the state of governance and risk management capabilities,L
"ricewaterhouse9oopers 0ndia 0nternal #udit Services leader Satyavati 7erera said.
!he boards of directors expect their internal audit functions to play a greater role in
providing assurance in corporate governance, risk management, ethics compliance and
fraud prevention and not )ust in internal controls, 7erera added.
!he studies were based on interview and survey data from 9hief #udit Executives of ?4
selected large companies in #sia "acific and from MS +ortune 6?4 companies.
Globalisation has been a double&edged sword. !o those able and willing to seiNe the
opportunities and manage globalisation on their own terms, it has provided the basis of
unprecedented growth. 9hina and 0ndia, two countries with 6.. billion people together,
have for more than a uarter century been growing at historically unprecedented rates.
!hey have taken advantage of globalisation of knowledge and of markets.
7ut elsewhere, matters have not worked out so well. !here is growing disparity between
the richest countries and the poorest countries, and growing ineualities within most
countries around the world. !he number of people in poverty in #frica has doubled in the
past two decades.
#nd globalisation, as it has been managed, has contributed to both of these problems. +or
instance, the last trade agreement, the Mruguay 'ound, signed in Marrakech in the spring
of ,22., was so unfair that the poorest countries of the world were actually made poorer.
0n the (orth, global competition has helped drive down wages of unskilled workers,
exacerbating similar trends coming from changes in technologies and the weakening of
labour unions.
Economic theory never said that everyone would gain as a result of globalisation. 0t said
that the winners could compensate the losers, not that they would. #nd they haven%t.
Some say that globalisation is inevitable, but that is simply wrongJ the extent of
globalisation, as conventionally measured, for instance, by the ratio of trade or capital
flows to G1", was actually stronger before the +irst *orld *ar than in the interwar
period. #nd unless we ensure that globalisation has more winners and few losers
there can be a backlash against globalisation. 0ndeed, in many uarters, one can already
see such a backlash taking shape.
!his would be unfortunate both for those in the developed and the developing
countries. Standard economic theory emphasises that opening up markets provides
opportunities for each country to take advantage of its comparative advantage, and
provides enhanced scope for efficiency gains from economies of scale. 7ut there is an
even more compelling argument for globalisationJ the encounters between different
cultures, the new opportunities which globalisation brings, as well as the enhanced
competition that accompanies, all these mean that globalisation can, in fact, be a
tremendous spur for innovation and creativity.
#n alternative world is possibleJ globalisation can be managed differently. 0n Making
GlobaliNation *ork, 0 explain how this can be done. !he problems that have been
encountered are not inevitable. !hey are a conseuence of the particular way that
globalisation has been managed or mismanaged especially in the post 9old&*ar
world. 0 lay out a set of reforms some small, some large, some that will take years to
be brought about, some that are already in the process of being made that will at least
make globalisation work better.
+rom a global perspective, making globalisation work will reuire a fairer trade regime, a
true development round, not what the advanced industrial countries have tried to sell as
the development round. 0t reuires redressing the imbalance between capital and labour
market liberalisation. 0t reuires an intellectual property regime markedly different from
that embodied in !'0"s, the intellectual property provisions of the Mruguay 'ound,
which was both bad for global science and for developing countries. *hat is needed is an
intellectual property regime that helps narrow the knowledge gap that separate developed
from less developed countries not one which reduces access to knowledge and denies
access to life&saving medicines, but which, at the same time, provides little incentive for
research in the diseases that plague the developing countries.
Making globalisation work will also reuire a legal regime which provides cross&border
protection for firms, but also imposes on them responsibilities, e.g., concerning the
environment and worker rights. 0t will reuire doing something about the most pressing
global environmental problems, especially global warmingJ it will do us little good to
make economic globalisation work, if our planet suffers as a conseuence. #nd as is so
often the case, the poorest are the most likely to suffer the most a third of 7angladesh
will be submerged, and incomes, already low, will likely fall even more.
!here are challenges too within 0ndia in making globalisation work. !he countries that
have been most successful have managed globalisation on their own terms, taken a
pragmatic course, eschewing ideologies and the kind of market fundamentalism on which
the *ashington consensus neo&liberal policies were premised. +or instance, capital
market liberalisation has, around the world, been associated with greater instability, but
not greater growth.
0ntellectual property is important, but a poorly designed intellectual property regime can
actually retard innovation and growth< it is a mistake for 0ndia 8or any other developing
country: to imitate #merica%s intellectual property regimeJ as in so many other areas, one&
siNe&fits&all policies do not work, and an intellectual property regime which was designed
for #merica would not necessarily be appropriate for 0ndia. *orse still, #merica%s
intellectual property regime is not working well for #mericaJ it may be enhancing profits
for the pharmaceutical industry, but it is impeding the advancement of science. 0t is
especially important that generic medicines are available. 0t is a matter of life and deathJ
the poor simply cannot afford brand name medicines.
0n coping with globalisation, it is important too that one makes sure that credit is
available to all sectors of the economy< in too many cases, financial services liberalisation
has been followed by the dominance of foreign banks, which make credit available to
foreign enterprises and large domestic enterprises< but the flow of credit to small and
medium siNe enterprises and the rural sector dries up. !here are ways of dealing with
these problems< but, first, one has to recognise that there is a problem.
So too, around the world, globalisation has been associated with growing ineualities,
and unless policies are put into place to counter these, there can be increasing political
and social instability, of the kind so manifest in Eatin #merica.
!he problem, as 0 have said, is not with globalisation, but with the way globalisation has
been managed. !he reforms 0 have suggested will at least make globalisation work better.
*ith the reforms, globalisation has a chance of living up to its promise and its potential,
of improving the living standards, not )ust of the rich in the richest country of the world,
but of the rich and the poor, in both the developing and the developed world.
!ake a lesson on globaliNation
9ities are often called the melting pot of cultures. !hey subsume diverse identities,
nurture anonymity and creativity and foster competition. 9ities also go beyond caste and
class moorings and propagate liberal values.
@ne of the reasons for this has been the existence of modern education systems that
pervade the cities and go on to make these as the nucleus of a large pool of talent. #
vibrant city, comprising a modern talent pool, is also the lifeline of a robust society and a
progressive economy.
Singapore, realising the importance of education, is focusing on converting the country
into a world&class education hub. !he government is pouring millions of dollars, hoping
to transform both its economy and identity.
AEook at 7oston, for instance. !he city started as a student city but gradually as
companies realised that there is skilled human resource available, the whole economy of
the city changed. Manipal in 0ndia is an excellent example. # small town ,4 years back,
there is so much activity going on right now. @ne has to realise that cities grow around
knowledge centers,B says 00M Eucknow director 1evi Singh.
#ccording to the SundayE!%s 9E@ perception poll, Mumbai tops the chart followed by
7angalore and 1elhi while the bottom runners are "atna, !rivandrum, 'aipur and
Guwahati. A0 would think 1elhi would have been in top two, considering the number of
uality higher education institutes. !he city is lot more cosmopolitan and gives plentiful
opportunity for global exposure,B says dean, +aculty of Management Studies, O P Mitra.
Every city has to realise that we are now talking about global citiNens and this is what is
lacking in most of the cities across 0ndia. AState funding is definitely needed but we have
to keep in mind that any amount of investment is not enough when it comes to education.
*e have to create intellectual global work pool and that needs national as well as
international exposure, which all the non&metros lack,B he adds.
!here is a lot of thrust on primary education these days but that alone cannot guarantee a
skilled workforce. !here are certain cities which have uality primary education
institutes, yet they fail to make a mark when it comes to higher education. Eucknow is an
excellent example.
A!here are some of the best convent schools in the city but there is a huge gap between
primary education and college education. 0nfrastructure is one of the issues but the
government also fails to recognise that there is a need to develop manpower,B adds Singh.
7ut the drive to provide world&class education should not stop with brick&and&mortar
educational institutions. A!he government cannot afford to have a short&sighted approach.
0t will have to play a proactive role from urban planning sense. More often than not, there
is not enough real estate available for educational institutions. +or a city it is very
important to invest in its education system,B says Shantanu "rakash, 9E@ of Edu9omp
Solutions.
Globalisation is binding trade and markets across the world closer together. !his
integration has raised all boats, with countries across the globe, from 9hina, #merica to
war ravaged Eiberia and Sudan recording unprecedented growth and low inflation.
Much of this can be attributed to efficiencies deriving from international trade, which
grew substantially faster than G1". !wo&way merchandise and commercial services trade
as a percentage of global G1" at market prices increased from D-I in ,2/? to -4I in
644?.
0t is conseuently surprising that recent months have seen the emergence of a new
counter intuitive hypothesis, to which even !he Economist has lent its weight, which flies
in the face of this globalising trend. #sia is seen as the new engine of growth that could
drive the global economy out of the recession induced by the subprime crisis in the MS.
>ow persuasive is this argumentH
!he argument runs roughly as follows. #s #rthur Eewis pointed out in his (obel "riNe
lecture three decades ago, economic growth in developing countries has historically been
dependent on economic prospects in @E91 countries that account for the ma)or share of
global G1". 0n 644-, the MS, MP, Oapan, +rance, Germany, 0taly and Spain still
accounted for ?/I of global G1" at market prices, with the MS alone accounting for
63I. !heir share at purchasing power parity was .,I.
@ver the last few decades, however, developing countries, in particular those in #sia,
have been growing much faster than @E91 countries. !hus the combined share of 9hina
and 0ndia in global G1" increased from ?.3I in ,23,&3? to ,.I in 644? at """
8according to the revised 09" tables:. !he share of the four largest developing 87'09:
economies was 64I.
!he Economist points out that 7'09 nations are the least dependent on the MS, with
exports to #merica accounting for )ust /I of 9hinaKs G1", .I of 0ndiaKs, DI of 7raNilKs
and ,I of 'ussiaKs. @ver 2?I of 9hinaKs growth of ,,.6I in the current year came from
domestic demand.
#sia%s share in global trade has also risen significantly. *hile global exports of goods and
services trebled between ,223 and 6443, #sia%s exports increased almost ten times.
9hina%s share in global exports has increased dramatically from ,.2I in ,23,&3? to /.6I
in 6444&4?.
#sia%s intra&trade has also grown substantially over the past decade. Since 6444, the share
of the MS in regional exports has come down significantly 8with the notable exception of
9hina:, even as exports to 9hina have risen dramatically. 0ndia%s trade with 9hina now
matches its trade with its long&standing biggest trading partner, the Mnited States.
#ccording to the 0M+, the impact of regional perturbations on domestic growth has
conseuently increased sharply over the last two decades.
!he argument is sometimes more nuanced. # recent 0M+ paper argues, for instance, that
while there is now closer coupling between so&called $developing economies% and @E91
countries, there is greater decoupling between emerging economies and @E91 countries.
!here are also other versions of the same basic argument. Oohn #uthers described, in the
+inancial !imes of +eb 62, 644/, decoupling as Lthe notion that demand for raw materials
in the developing world will allow emerging markets to grow even if there is a MS
recessionL. !he $decoupling% sentiment is certainly implicit in the current boom in world
commodity prices that are scaling historic highs despite fears of recession in @E91
countries, particularly #merica.
!he decoupling hypothesis notwithstanding, the MS share in 9hinese exports has
remained constant at )ust over 64I over this period, even though half its exports are now
to developing countries. 0ndeed, #sia runs a huge cumulative current account surplus of
over FD44 billion with the rest of the world, which is at the core of a fundamental global
imbalance that keeps the global financial and real economies closely coupled.
7ecause of this continuing external dependence it is difficult to see how #sia would not
be significantly affected by a MS recession unless 9hina and other developing countries
are able to expand domestic demand substantially. !his would mean abandoning their
current mercantilist mindset, letting their currencies appreciate, thereby increasing the
purchasing power of their people.
0ndia appears to be less vulnerable to the global downtown because it is much more
dependent on domestic demand for growth, being uniue amongst #sian countries in
continuing to run a current account deficit. Even so, 0ndia%s engine of growth is its
booming services sector that is highly coupled with global, and especially MS, markets.
!he Economist points out that domestic demand constitutes by far the biggest source of
G1" growth in 9hina and 0ndia. >owever, the trend over the last 64 years actually
indicates greater coupling. 9hina%s consumption has declined from two&thirds of the G1"
in ,2/- to )ust over half in 644-, and 0ndia%s from /?I to three&fourths.
9hina actually ran a current account deficit 64 years agoC G1" at """ is also not the best
measure for world trade because tradables involve international purchasing power. !he
combined share of 9hinese and 0ndian G1" in 644? was only about /I at market
exchange rates, and the entire 7'09 share was )ust over ,4I.
1ecoupling sceptics are on even stronger ground when they draw attention to growing
global coupling in capital flows and inflation. 7etween two&thirds to three&fourths of
export revenues, remittances and foreign investment, and almost all cross&border
syndicated loans in developing countries continue to be along the (orth&South axis.
MS monetary policy is exercising stronger, indeed determining, pull on volatile cross&
border capital flows. !he huge hard currency reserves of developing countries, the flip
side of the global imbalance, are also deepening financial integration which may well be
the ultimate root of the current storm in credit markets.
@n balance, the decoupling hypothesis that growth in developing countries is increasingly
decoupling from @E91 countries does not appear to be very compelling. Stock markets,
certainly, are far from convinced that some countries can continue to swim robustly even
as others sink.
# global company operates like a network and distributes operations around the world.
'angu Salgame, 9isco 0ndia%s country manager between 644D&644-, can clearly
remember the moment when he first realised that the world was indeed becoming flat.
Salgame was trying to sell a new 9isco technology to a large global financial institution%s
back office in 0ndia.
*hen the 0ndian manager running the back office convinced his corporate headuarters
in the MS to go with 9isco, Salgame, who spent two decades of his career in the MS,
understood that corporate decision&making was finally getting distributed. A9lients were
trusting their managers in places like 0ndia to make important buying decisions, it was
time 9isco looked at its own corporate structure differently,B he says.
#lthough Salgame turned down the offer to run 9isco%s Globalisation 9enter in
7angalore and now works at 0ndian telecom company !e)as (etworks, he remains a firm
believer that distribution of the corporate mind is an idea whose time has come.
"anka) =aish, M1, #ccenture calls this trend the emergence of a multipolar world.
#ccording to =aish where there were M(9s in the past today there are global companies.
A#n M(9 operates in many markets around the world but has a core center of gravity.
# global company operates like a network and distributes operations around the world. 0t
is global in the way the leadership is structured,B says =aish who runs #ccenture%s 7"@
delivery network across ten countries out of 0ndia. So although the F,2.3 billion
#ccenture operates in ?4 countries, it does not have a headuarters. 0nstead it has five
"QE centers based on industry groups. A@ur 9E@ and his leadership team are across the
world. !hey are connected virtually and travel extensively,B says =aish.
A0f you look at our revenue distribution and where our talent is based, 0 am ,44I sure
that there will be a time when one of the "QE centers will be in the East,B says =aish.
0ndia with more than D?,444 employees is already #ccenture%s largest geography by
headcount.
9learly one big reason for globalisation is search for talent. A!here were times when we
had to walk away from an opportunity because we couldn%t get talent. !oday we know
where the talent is, how to train and manage it from multiple locations,B says Patherine
>egmann, general manager, global integration executive, 07M and the highest&ranking
07M executive in 0ndia. AMnder Sam 89hairman Samuel O "almisano: 07M has moved to
a globally integrated enterprise. *e have consolidated global functions such as
procurement in 9hina, finance in 'aleigh and accounting in Manila. *e get synergy and
learn to handle scale with less people,B says >egmann.
!oday the F2,.. billion 07M employs 3-,444 people in 0ndia, its second largest employee
base in the world. A0n 6444 we clearly moved work for cost reasons, now we are growing
here because of skills and capability. 0n many cases today the front&end work is done in
0ndia and the back end is in some other country. Rou would never see that before,B says
>egmann. 07M is even changing its corporate culture to adapt to a globally integrated
world.
A07M is moving away from hierarchical management structure to an empowered
structure,B she says adding that she herself has learnt to be less directive and more
collaborative. A0f 0 had come to this role ,? years ago it would have been a problem. (ow
0 have a style that is more comfortable to people here,B says >egmann.
S0E09@( =#EEERJ 0ndians and 9hinese have embraced economic globalisation, but the
enthusiasm for free market economies and global commerce is waning in the *est,
especially in the Mnited States, according to new poll released on +riday.
*hile /2 per cent of 0ndians and 2, per cent of 9hinese support foreign trade, the figure
is only ?2 per cent in the worldKs largest economy, the MS, the "ew Global #ttitudes
survey of more than .?,444 people in .3 countries has found.
*hile in the two #sian giants the public support for foreign trade has remained almost
same since 6446, in #merica it has seen a sharp decline since 6446, when 3/ per cent
believed it was having a positive impact.
0nterestingly, when it comes to views about multinational corporations the two rapidly
expanding #sian economies of 9hina and 0ndia are experiencing different trends.
!he 9hinese are now less likely to believe foreign corporations are helping their country
and while more and more 0ndians are seeing a positive impact. 0ndiaKs South #sian
neighbours, 7angladesh and "akistan, also have become substantially more welcoming to
foreign companies over the last five years.
0n 0ndia, 3D percent of the public believes foreign companies are having positive impact
on the country, while in the MS only .? percent believe foreign companies are good and
that people are better off in free market economies.
9hina cautions 0ndia to cut down the thrust on globalisation
*hen trade economist 'a)eev #nantaram visited 9hina recently to study the impact of
foreign investment and commerce in that country, he wasn%t prepared for the answers he
got. >e had heard enough from fellow 0ndians extolling 9hina%s success in attracting
foreign investment and commerce and complaining how we lack the smarts to learn from
it. So, he felt a sense of irony when the 9hinese told him 0ndia should not repeat 9hina%s
mistakes.
A9hina is realising that it can no longer sustain the fiscal burden its export&led economy
brings. Everywhere 0 went, people were saying foreign companies have sueeNed us,B
says #nantaram, a senior fellow at 0ndian 9ouncil for 'esearch on 0nternational
Economic 'elations.
+or long, globalisation as dictated by the rich countries and the 7rettonwoods institutions
has been alternatively described as the panacea for the ills of poor countries or as the very
problem that plunged them in the crisis.
@ne such happily&ever&after story )ust slipped out of the hands of the high priests of
globalisation.
9hina, the mightiest example of the virtues of international $coupling%, has made a ,/4&
degree turn this year and substantially cut down on its globalisation thrust. 0t eliminated
tax breaks for foreign investments, limited merger deals, withdrew many of the support
schemes for export&oriented enterprises and clamped down on foreign investment in
many sectors.
!hese measures came in the wake of an increasing concern among the people and
government officials that the country was falling into the hands of powerful
multinationals that left little for its people. *ith the new measures, A9hina intends to use
foreign investment rather than be used by foreign investors,B one official said.
0f anything, 0ndia must learn from 9hina%s bold move to wrest the globalisation initiative
from the *estern corporate empire and make the process one driven by developing
nations. A0t is true that the benefits of globalisation have often gone to a small coterie,B
says #nantaram. 0n 9hina, for instance, /?I of the profits generated by M(9&related
pro)ects go out of the country, leaving only ,?I value for local stakeholders, he says.
!he country has not been any more successful with technology transfer, often a ma)or
reason for globalisation.
9ontrary to the way 9hina responds to these challenges, public policy in 0ndia has been
meek and tentative, experts say. *hile 0ndia has not been the worst sufferer of
globalisation despite ,3 years of outward&looking policies, it has nevertheless failed to
direct international attention towards the improvement of key sectors such as education,
healthcare and infrastructure.
0n fact, the debate on infrastructure reeks of elitism ignoring the need to empower poorer
sections, economists say. A*hen you hear the discussion on infrastructure development,
you will see it often revolves around airports, urban power and so on. *e are not even
discussing the lack of very, very basic facilities in rural areasJ the lack of drinking water
taps, motorable roads or a bus stop,B says "rofessor S Subramanian of Madras 0nstitute of
1evelopment Studies.
0ncreasing income disparities is becoming the most formidable challenge for 0ndia. *hen
even the Mnited States and prosperous European countries debate how to improve social
security, there has been little debate in 0ndia on enabling state interventions to give the
poor the power to benefit from economic growth. Economic progress is often measured
only in terms of G1" growth on the fond hope that it will all percolate down to the poor
people in the end.
0mpact on 0ndiaJ
0ndia opened up the economy in the early nineties following a ma)or crisis that led by a
foreign exchange crunch that dragged the economy close to defaulting on loans. !he
response was a slew of 1omestic and external sector policy measures partly prompted by
the immediate needs and partly by the demand of the multilateral organisations. !he new
policy regime radically pushed forward in favour of amore open and market oriented
economy.
Ma)or measures initiated as a part of the liberalisation and globalisation strategy in the
early nineties included scrapping of the industrial licensing regime, reduction in the
number of areas reserved for the public sector, amendment of the monopolies and the
restrictive trade practices act, start of the privatiNation programme, reduction in tariff
rates and change over to market determined exchange rates.
@ver the years there has been a steady liberalisation of the current account transactions,
more and more sectors opened up for foreign direct investments and portfolio
investments facilitating entry of foreign investors in telecom, roads, ports, airports,
insurance and other ma)or sectors.
!he 0ndian tariff rates reduced sharply over the decade from a weighted average of 36.?I
in ,22,&26 to 6..- in ,22-&23.!hough tariff rates went up slowly in the late nineties it
touched D?.,I in 644,&46. 0ndia is committed to reduced tariff rates. "eak tariff rates are
to be reduced to be reduced to the minimum with a peak rate of 64I, in another 6 years
most non&tariff barriers have been dismantled by march 6446, including almost all
uantitative restrictions.
0ndia is GlobalJ
!he liberalisation of the domestic economy and the increasing integration of 0ndia with
the global economy have helped step up G1" growth rates, which picked up from ?.-I
in ,224&2, to a peak level of 33./I in ,22-&23. Growth rates have slowed down since
the country has still bee able to achieve ?&-I growth rate in three of the last six years.
!hough growth rates has slumped to the lowest level ..DI in 6446&4D mainly because of
the worst droughts in two decades the growth rates are expected to go up close to 34I in
644D&4.. # Global comparison shows that 0ndia is now the fastest growing )ust after
9hina.
!his is ma)or improvement given that 0ndia is growth rate in the ,234%s was very low at
DI and G1" growth in countries like 7raNil, 0ndonesia, Porea, and Mexico was more
than twice that of 0ndia. !hough 0ndia%s average annual growth rate almost doubled in the
eighties to ?.2I it was still lower than the growth rate in 9hina, Porea and 0ndonesia.
!he pick up in G1" growth has helped improve 0ndia%s global position. 9onseuently
0ndia%s position in the global economy has improved from the /th position in ,22, to .th
place in 644,. *hen G1" is calculated on a purchasing power parity basis.
Globalisation and "overtyJ
Globalisation in the form of increased integration though trade and investment is an
important reason why much progress has been made in reducing poverty and global
ineuality over recent decades. 7ut it is not the only reason for this often unrecognised
progress, good national polices , sound institutions and domestic political stability also
matter.
1espite this progress, poverty remains one of the most serious international challenges
we face up to ,.6 billion of the developing world ../ billion people still live in extreme
poverty.
7ut the proportion of the world population living in poverty has been steadily declining
and since ,2/4 the absolute number of poor people has stopped rising and appears to
have fallen in recent years despite strong population growth in poor countries. 0f the
proportion living in poverty had not fallen since ,2/3 alone a further 6,?million people
would be living in extreme poverty today.
0ndia has to concentrate on five important areas or things to follow to achieve this goal.
!he areas like technological entrepreneurship, new business openings for small and
medium enterprises, importance of uality management, new prospects in rural areas and
privatisation of financial institutions. !he manufacturing of technology and management
of technology are two different significant areas in the country.
!here will be new prospects in rural 0ndia. !he growth of 0ndian economy very much
depends upon rural participation in the global race. #fter implementing the new
economic policy the role of villages got its own significance because of its uniue
outlook and branding methods. +or example food processing and packaging are the one
of the area where new entrepreneurs can enter into a big way. 0t may be organised in a
collective way with the help of co&operatives to meet the global demand.
Mnderstanding the current status of globalisation is necessary for setting course for
future. +or all nations to reap the full benefits of globalisation it is essential to create a
level playing field. "resident 7ush%s recent proposal to eliminate all tariffs on all
manufactured goods by 64,? will do it. 0n fact it may exacerbate the prevalent
ineualities. #ccording to this proposal, tariffs of ?I or less on all manufactured goods
will be eliminated by 644? and higher than ?I will be lowered to /I. Starting 64,4 the
/I tariffs will be lowered each year until they are eliminated by 64,?.
G1" Growth rateJ
!he 0ndian economy is passing through a difficult phase caused by several unfavourable
domestic and external developments< 1omestic output and 1emand conditions were
adversely affected by poor performance in agriculture in the past two years. !he global
economy experienced an overall deceleration and recorded an output growth of 6..I
during the past year growth in real G1" in 644,&46 was ?..I as per the Economic
Survey in 6444&4,. !he performance in the first uarter of the financial year is?./I and
second uarter is -.,I.
Export and 0mportJ
0ndia%s Export and 0mport in the year 644,&46 was to the extent of D6,?36 and D/,D-6
million respectively. Many 0ndian companies have started becoming respectable players
in the 0nternational scene. #griculture exports account for about ,D to ,/I of total annual
of annual export of the country. 0n 6444&4, #gricultural products valued at more than MS
F -million were exported from the country 6DI of which was contributed by the marine
products alone. Marine products in recent years have emerged as the single largest
contributor to the total agricultural export from the country accounting for over one fifth
of the total agricultural exports. 9ereals 8mostly basmati rice and non&basmati rice:, oil
seeds, tea and coffee are the other prominent products each of which accounts fro nearly
? to ,4I of the countries total agricultural exports.
*here does 0ndian stand in terms of Global 0ntegrationH
0ndia clearly lags in globalisation. (umber of countries have a clear lead among them
9hina, large part of east and far east #sia and eastern Europe. Eets look at a few
indicators how much we lag.
S @ver the past decade +10 flows into 0ndia have averaged around 4.?I of G1" against
?I for 9hina ?.?I for 7raNil. *hereas +10 inflows into 9hina now exceeds MS F ?4
billion annually. 0t is only MS F .billion in the case of 0ndia
S 9onsider global trade T 0ndia%s share of world merchandise exports increased from .4?I
to .43I over the pat 64 years. @ver the same period 9hina%s share has tripled to almost
.I.
S 0ndia%s share of global trade is similar to that of the "hilippines an economy - times
smaller according to 0M+ estimates. 0ndia under trades by 34&/4I given its siNe,
proximity to markets and labour cost advantages.
S 0t is interesting to note the remark made last year by Mr. 7imal Oalan, Governor of '70.
1espite all the talk, we are now where ever close being globalised in terms of any
commonly used indicator of globalisation. 0n fact we are one of the least globalised
among the ma)or countries T however we look at it.
S #s #martya Sen and many other have pointed out that 0ndia, as a geographical, politico&
cultural entity has been interacting with the outside world throughout history and still
continues to do so. 0t has to adapt, assimilate and contribute. !his goes without saying
even as we move into what is called a globalised world which is distinguished from
previous eras from by faster travel and communication, greater trade linkages, denting of
political and economic sovereignty and greater acceptance of democracy as a way of life.
9onseuencesJ
!he implications of globalisation for a national economy are many. Globalisation has
intensified interdependence and competition between economies in the world market.
!his is reflected in 0nterdependence in regard to trading in goods and services and in
movement of capital. #s a result domestic economic developments are not determined
entirely by domestic policies and market conditions. 'ather, they are influenced by both
domestic and international policies and economic conditions. 0t is thus clear that a
globalising economy, while formulating and evaluating its domestic policy cannot afford
to ignore the possible actions and reactions of policies and developments in the rest of the
world. !his constrained the policy option available to the government which implies loss
of policy autonomy to some extent, in decision&making at the national level.
rumJ GlobaliNation for *homH
!ime to change the rules && and focus on poor workers
by 1ani 'odrik
GlobaliNation has brought little but good news to those with the products, skills, and
resources to market worldwide. 7ut does it also work for the worldKs poorH
!hat is the central uestion around which the debate over globaliNationin essence, free
trade and free flows of capitalrevolves. #ntiglobaliNation protesters may have had only
limited success in blocking world trade negotiations or disrupting the meetings of the
0nternational Monetary +und 80M+:, but they have irrevocably altered the terms of the
debate. "overty is now the defining issue for both sides. !he captains of the world
economy have conceded that progress in international trade and finance has to be
measured against the yardsticks of poverty alleviation and sustainable development.
+or most of the worldKs developing countries, the ,224s were a decade of frustration and
disappointment. !he economies of sub&Saharan #frica, with few exceptions, stubbornly
refused to respond to the medicine meted out by the *orld 7ank and the 0M+. Eatin
#merican countries were buffeted by a never&ending series of boom&and&bust cycles in
capital markets and experienced growth rates significantly below their historical
averages. Most of the former socialist economies ended the decade at lower levels of per&
capita income than they started itand even in the rare successes, such as "oland,
poverty rates remained higher than under communism. East #sian economies such as
South Porea, !hailand, and Malaysia, which had been hailed previously as Lmiracles,L
were dealt a humiliating blow in the financial crisis of ,223. !hat this was also the
decade in which globaliNation came into full swing is more than a minor inconvenience
for its advocates. 0f globaliNation is such a boon for poor countries, why so many
setbacksH
GlobaliNers deploy two counter&arguments against such complaints. @ne is that global
poverty has actually decreased. !he reason is simpleJ while most countries have seen
lower income growth, the worldKs two largest countries, 9hina and 0ndia, have had the
opposite experience. 8Economic growth tends to be highly correlated with poverty
reduction.: 9hinaKs growth since the late ,234saveraging almost / percent per annum
per capitahas been nothing short of spectacular. 0ndiaKs performance has not been as
extraordinary, but the countryKs growth rate has more than doubled since the early ,2/4s
from ,.? percent per capita to D.3 percent. !hese two countries house more than half of
the worldKs poor, and their experience is perhaps enough to dispel the collective doom
elsewhere.
!he second counter&argument is that it is precisely those countries that have experienced
the greatest integration with the world economy that have managed to grow fastest and
reduce poverty the most. # typical exercise in this vein consists of dividing developing
countries into two groups on the basis of the increase in their tradeLglobaliNersL versus
Lnon&globaliNersLand to show that the first group did much better than the second. >ere
too, 9hina, 0ndia, and a few other high performers like =ietnam and Mganda are the key
exhibits for the pro&globaliNation argument. !he intended message from such studies is
that countries that have the best shot at lifting themselves out of poverty are those that
open themselves up to the world economy.
>ow we read globaliNationKs record in alleviating poverty hinges critically, therefore, on
what we make of the experience of a small number of countries that have done well in the
last decade or two9hina in particular. 0n ,2-4, the average 9hinese expected to live
only D- years. 7y ,222, life expectancy had risen to 34 years, not far below the level of
the Mnited States. Eiteracy has risen from less than ?4 percent to more than /4 percent.
Even though economic development has been uneven, with the coastal regions doing
much better than the interior, there has been a striking reduction in poverty rates almost
everywhere.
*hat does this impressive experience tell us about what globaliNation can do for poor
countriesH !here is little doubt that exports and foreign investment have played an
important role in 9hinaKs development. 7y selling its products on world markets, 9hina
has been able to purchase the capital euipment and inputs needed for its moderniNation.
#nd the surge in foreign investment has brought much&needed managerial and technical
expertise. !he regions of 9hina that have grown fastest are those that took the greatest
advantage of foreign trade and investment.
7ut look closer at the 9hinese experience, and you discover that it is hardly a poster child
for globaliNation. 9hinaKs economic policies have violated virtually every rule by which
the proselytiNers of globaliNation would like the game to be played. 9hina did not
liberaliNe its trade regime to any significant extent, and it )oined the *orld !rade
@rganiNation 8*!@: only last year< to this day, its economy remains among the most
protected in the world. 9hinese currency markets were not unified until ,22.. 9hina
resolutely refused to open its financial markets to foreigners, again until very recently.
Most striking of all, 9hina achieved its transformation without adopting private&property
rights, let alone privatiNing its state enterprises. 9hinaKs policymakers were practical
enough to understand the role that private incentives and markets could play in producing
results. 7ut they were also smart enough to realiNe that the solution to their problems lay
in institutional innovations suited to the local conditionsthe household responsibility
system, township and village enterprises, special economic Nones, partial liberaliNation in
agriculture and industryrather than in off&the&shelf blueprints and *estern rules of
good behavior.
!he remarkable thing about 9hina is that it has achieved integration with the world
economy despite having ignored these rulesand indeed because it did so. 0f 9hina were
a basket case today, rather than the stunning success that it is, officials of the *!@ and
the *orld 7ank would have fewer difficulties fitting it within their worldview than they
do now.
9hinaKs experience may represent an extreme case, but it is by no means an exception.
Earlier successes such as South Porea and !aiwan tell a similar story. Economic
development often reuires unconventional strategies that fit awkwardly with the
ideology of free trade and free capital flows. South Porea and !aiwan made extensive use
of import uotas, local&content reuirements, patent infringements, and export subsidies
all of which are currently prohibited by the *!@. 7oth countries heavily regulated
capital flows well into the ,224s. 0ndia managed to increase its growth rate through the
adoption of more pro&business policies, despite having one of the worldKs most
protectionist trade regimes. 0ts comparatively mild import liberaliNation in the ,224s
came a decade after the onset of higher growth in the early ,2/4s. #nd 0ndia has yet to
open itself up to world financial marketswhich is why it emerged unscathed from the
#sian financial crisis of ,223.
7y contrast, many of the countries that have opened themselves up to trade and capital
flows with abandon have been rewarded with financial crises and disappointing
performance. Eatin #merica, the region that adopted the globaliNation agenda with the
greatest enthusiasm in the ,224s, has suffered rising ineuality, enormous volatility, and
economic growth rates significantly below those of the post&*orld *ar 00 decades.
#rgentina represents a particularly tragic case. 0t tried harder in the ,224s than virtually
any country to endear itself to international capital markets, only to be the victim of an
abrupt reversal in Lmarket sentimentL by the end of the decade. !he #rgentine strategy
may have had elements of a gamble, but it was solidly grounded in the theories
expounded by M.S.&based economists and multilateral agencies such as the *orld 7ank
and the 0M+. *hen #rgentinaKs economy took off in the early ,224s after decades of
stagnation, the reaction from these uarters was not that this was puNNling it was that
reform pays off.

*hat these countriesK experience tells us, therefore, is that while global markets are good
for poor countries, the rules according to which they are being asked to play the game are
often not. 9aught between *!@ agreements, *orld 7ank strictures, 0M+ conditions, and
the need to maintain the confidence of financial markets, developing countries are
increasingly deprived of the room they need to devise their own paths out of poverty.
!hey are being asked to implement an agenda of institutional reform that took todayKs
advanced countries generations to accomplish. !he Mnited States, to take a particularly
telling example, was hardly a paragon of free&trade virtue while catching up with and
surpassing 7ritain. 0n fact, M.S. import tariffs during the latter half of the nineteenth
century were higher than in all but a few developing countries today. !odayKs rules are not
only impractical, they divert attention and resources from more urgent developmental
priorities. !urning away from world markets is surely not a good way to alleviate
domestic povertybut countries that have scored the most impressive gains are those
that have developed their own version of the rulebook while taking advantage of world
markets.
!he regulations that developing nations confront in those markets are highly asymmetric.
0mport barriers tend to be highest for manufactured products of greatest interest to poor
countries, such as garments. !he global intellectual&property&rights regime tends to raise
prices of essential medicines in poor countries.
7ut the disconnect between trade rules and development needs is nowhere greater than in
the area of international labor mobility. !hanks to the efforts of the Mnited States and
other rich countries, barriers to trade in goods, financial services, and investment flows
have now been brought down to historic lows. 7ut the one market where poor nations
have something in abundance to sellthe market for labor serviceshas remained
untouched by this liberaliNing trend. 'ules on cross&border labor flows are determined
almost always unilaterally 8rather than multilaterally as in other areas of economic
exchange: and remain highly restrictive. Even a small relaxation of these rules would
produce huge gains for the world economy, and for poor nations in particular.
9onsider, for example, instituting a system that would allot temporary work permits to
skilled and unskilled workers from poorer nations, amounting to, say, D percent of the
rich countriesK labor force. Mnder the scheme, these workers would be allowed to obtain
employment in the rich countries for a period of three to five years, after which they
would be expected to return to their home countries and be replaced by new workers.
8*hile many workers, no doubt, will want to remain in the host countries permanently, it
would be possible to achieve acceptable rates of return by building specific incentives
into the scheme. +or example, a portion of workersK earnings could be witheld until
repatriation takes place. @r there could be penalties for home governments whose
nationals failed to comply with return reuirementsJ sending countriesK uotas could be
reduced in proportion to the numbers who fail to return.: # back&of&the&envelope
calculation indicates that such a system would easily yield F644 billion of income
annually for the citiNens of developing nationsvastly more than what the existing *!@
trade agenda is expected to produce. !he positive spillovers that the returnees would
generate for their home countriesthe experience, entrepreneurship, investment, and
work ethic they would bring back with themwould add considerably to these gains.
*hat is eually important, the economic benefits would accrue directly to workers from
developing nations. !here would be no need for Ltrickle down.L
0f the political leaders of the advanced countries have chosen to champion trade
liberaliNation but not international labor mobility, the reason is not that the former is
popular with voters at home while the latter is not. !hey are both unpopular. *hen asked
their views on trade policy, fewer than one in five #mericans re)ect import restrictions. 0n
most advanced countries, including the Mnited States, the proportion of respondents who
want to expand imports tends to be about the same or lower than the proportion who
believe immigration is good for the economy. !he main difference seems to be that the
beneficiaries of trade and investment liberaliNation have managed to become politically
effective. Multinational firms and financial enterprises have been successful in setting the
agenda of multilateral trade negotiations because they have been uick to see the link
between enhanced market access abroad and increased profits at home. 9ross&border
labor flows, by contrast, usually have not had a well&defined constituency in the
advanced countries. 'ules on foreign workers have been relaxed only in those rare
instances where there has been intense lobbying from special interests. *hen Silicon
=alley firms became concerned about labor costs, for example, they pushed 9ongress
hard to be allowed to import software engineers from 0ndia and other developing nations.
0t will take a lot of work to make globaliNationKs rules friendlier to poor nations. Eeaders
of the advanced countries will have to stop dressing up policies championed by special
interests at home as responses to the needs of the poor in the developing world.
'emembering their own history, they will have to provide room for poor nations to
develop their own strategies of institution&building and economic catch&up. +or their part,
developing nations will have to stop looking to financial markets and multilateral
agencies for the recipes of economic growth. "erhaps most difficult of all, economists
will have to learn to be more humble.
financial globaliNation can help developing countries to better manage output and
consumption volatility. the essence of global financial diversification is that a country is
able to shift some of its income risk to world markets. Since most developing countries
are rather specialiNed in their output and factor endowment structures, they can, in theory,
obtain even bigger gains than developed countries through international consumption risk
sharingthat is, by effectively selling off a stake in their domestic output in return for a
stake in global output.
!he pharmaceutical industry has taken advantage of the modern trend of globalisation to
increase their assets and influence in medical healthcare across the globe. 9ompanies
spend large amounts of money on advertising, marketing and lobbying 8government or
parliament i.e. the decision&making body:. !he industry spends roughly MSF,2 billion a
year for that sole cause
!here have also been drastic improvements to the state of third&world countries. 0n 9hina,
the portion of the population living with a daily income of F,&F6 per day was decreased
by ?6I in 6/ years. !his was due to the country%s participation in the *orld !rade
@rganisation T and in effect, a direct participation in globalisation. Mnder the rules of the
*orld !rade @rganisation, a developing country has options for obtaining needed
medications under compulsory licensing or importation of cheaper versions of the drugs,
even before patent expiration.
"harmaceutical companies often offer much needed medication at no or reduced
cost to the developing countries. !here have been numerous contributions in the past,
with many more expected to follow. !he $Marks Gift% initiative donated billions of 'iver
7lindness drugs in #frica. !here was also "fiNer%s gift of free or discounted +luconaNole
and other drugs to combat #01S in South #frica. GSP committed itself to give free
#lbenNadole tables for, and until, the elimination of lymphatic filariasis world&wide.
+inally, in 644-, (ovartis committed F3?? million in corporate citiNenship initiatives
around the world, mainly focusing on improved access to medicines in the developing
world through its access Medicine "ro)ects. !his included donation of medicine to
patients affected by leprosy, tuberculosis and malaria< Glivec patient assistance
programmes and relief to support ma)or humanitarian organisations with emergency
medical needs.
GlobaliNation has a relatively new idea that the world has been embracing. !he positive
effects of globaliNation are numerous and extremely beneficial for everyone in all
countries. 0t has been the most successful prosperity and anti&poverty movement in
modern history.
!he #dvantages 0nclude...
+orces businesses to compete on a global scale. !his allows the market place to
really work and gives consumers a better advantage. (o long will businesses be
able to corner markets because politicians protect them. !heyKll now to compete
with foreign businesses that may or may not be able to do business more
efficiently.
9ountries move to market sectors that they are better at. !his simply means that
the labor in a country is going to do what itKs best at. !here is no need for
#mericans to do manufacturing when someone in 9hina can do it better. @ur
labor is better served doing something beneficial.
!he consumer is the real winner. 1espite the desire from some politicians to
protect workers, there are far more consumers than there are workers, but no one
wants to seem to protect them. 9onsumers should not be forced to buy over priced
goods from #merican buyers when you can get the same uality for less if it is
made in 9hina. (ow consumers can get the best products for the best prices.
Everyone grows more prosperous. Oust look at 9hina and 0ndia. 7efore
globaliNation they were very poor countries. !he standards of living were
extremely bad. (ow these people are becoming more prosperous. !hese countries
having mega economic booms. "eople that could never afford a car are now
getting them. (ot to mention the fact from the consumers side that are benefiting
from saving money which can be used to save or spend on other things.
!hese are the positive effects of globaliNation. 0t is a movement that is pro&free trade, pro&
prosperity and anti&poverty. 0t is helping the developing world raise itKs standard of living
as well as raising the standard of living in the developed world.
GlobaliNation is the increasing interconnection of people and places as a result of
advances in transport, communication, and information technologies that causes political,
economic, and cultural convergence!he word LglobaliNationL can be traced back to
,2..Ucitation neededV. !he term has been used by economists since ,2/,< however, its
concepts did not permeate popular consciousness until the later half of the ,224s. !he
earliest concepts and predictions of globaliNation were penned by an #merican
entrepreneur&turned&minister 9harles !aNe 'ussell who first coined the term Kcorporate
giantsK in ,/23. =arious social scientists have tried to demonstrate continuity between
contemporary trends of globaliNation and earlier periods. !he first era of globaliNation 8in
the fullest sense: during the ,2th century was the rapid growth of international trade
between the European imperial powers, the European colonies, and the Mnited States.
#fter *orld *ar 00, globaliNation was restarted and was driven by ma)or advances in
technology, which led to lower trading costs.GlobaliNation in the era since *orld *ar 00
was first the result of planning by economists, business interests, and politicians who
recogniNed the costs associated with protectionism and declining international economic
integration. !heir work led to the 7retton *oods conference and the founding of several
international institutions intended to oversee the renewed processes of globaliNation,
promoting growth and managing adverse conseuences. !hese were the 0nternational
7ank for 'econstruction and 1evelopment 8the *orld 7ank: and the 0nternational
Monetary +und. 0t has been facilitated by advances in technology which have reduced the
costs of trade, and trade negotiation rounds, originally under the auspices of G#!!,
which led to a series of agreements to remove restrictions on free trade. !he Mruguay
round 8,2/. to ,22?: led to a treaty to create the *orld !rade @rganiNation 8*!@:, to
mediate trade disputes and set up a uniform platform of trading. @ther bi& and multilateral
trade agreements, including sections of EuropeKs Maastricht !reaty and the (orth
#merican +ree !rade #greement 8(#+!#: have also been signed in pursuit of the goal of
reducing tariffs and barriers to trade.
Eooking specifically at economic globaliNation, it can be measured in different ways.
!hese centre around the four main economic flows that characteriNe globaliNationJ
Goods and services, e.g. exports plus imports as a proportion of national income or per
capita of population
Eabour5people, e.g. net migration rates< inward or outward migration flows, weighted by
population
9apital, e.g. inward or outward direct investment as a proportion of national income or
per head of population
!echnology, e.g. international research Q development flows< proportion of populations
8and rates of change thereof: using particular inventions 8especially Kfactor&neutralK
technological advances such as the telephone, motorcar, broadband:
!o what extent a nation&state or culture is globalised in a particular year has until most
recently been measured employing simple proxies like flows of trade, migration, or
foreign direct investment, as described above.
#s globaliNation is not only an economic phenomenon, a multivariate approach to
measuring globaliNation is the recent index calculated by the Swiss !hink tank P@+. !he
index measures the three main dimensions of globaliNationJ economic, social, and
political. 0n addition to three indices measuring these dimensions, an overall index of
globaliNation and sub&indices referring to actual economic flows, economic restrictions,
data on personal contact, data on information flows, and data on cultural proximity is
calculated. 1ata are available on a yearly basis for ,66 countries, as detailed in 1reher,
Gaston and Martens 8644/: U?V. #ccording to the index, the worldKs most globalised
country is 7elgium, followed by #ustria, Sweden, the Mnited Pingdom and the
(etherlands. !he least globalised countries according to the P@+&index are >aiti,
Myanmar the 9entral #frican 'epublic and 7urundi.U6V. @ther measures conceptualiNe
GlobaliNation as 1iffusion and develop interactive procedure to capture the degree of its
impact Oahn 644-.
#.!. Pearney and +oreign "olicy MagaNine )ointly publish another GlobaliNation 0ndex.
#ccording to the 644- index, Singapore, 0reland, SwitNerland, the M.S., the (etherlands,
9anada and 1enmark are the most globalised, while Egypt, 0ndonesia, 0ndia and 0ran are
the least globalised among countries listed. 0n 6443, the figures for globaliNation index
for 0ndia is .2.34 8/6nd rank: compared with "akistanKs ?6.D? 8rank 3,:, 7raNil ?2.-4
8rank ?.:, Mnited States /4./D 8rank ,2:, MP /2.62 8rank .:.
(otwithstanding the low level of globaliNation of 0ndian economy, the impact of
globalisation has been highly positive in all most all spheres of economic and social life
and virtually no negative effect. 0t is only because of opening uo of the hitherto closed,
govt.&oppressed and controlled economy to the process of globalisation that has helped
0ndian economy to grow rapidlyJin the last ,4&,6 years, 0ndiaKs economic growth has
been high, exports have boomed, incidence of poverty has been reduced, employment has
surged, begging by 0ndia for economic aid has stopped, long&term inflation rate has gone
down, scarcity of goods have disappeared, the uality of products available have
improved substantially and overall 0ndia has become progressively vibrant and
internationally competititive. 0ndian companies are setting up companies abroad, 0ndia
has better technological development for the benefit of the common man 8 mobiles, road
transport, cheap clothes, etc & only because of globalisation.
Effect of globalisation on 0ndian industry has been very positive, though some industrial
firms with the baggage of high cost, inefficient plants and processes inherited from the
past because of closed economyKs government dictated industrial policies and priorities
had to face serious problems in the beginning. 7ut soon most of the industries have
become more and more efficient, customer focussed and improved their international
competetiveness in terma of costs, prices, product uality and variety. 0ndustrial growth
has been very high and strong during the past decade because of globalisation. Exports
have increased tremendously. 0nduan industries are also expanding abroad. +oreign
companies have substantially increased their investments in 0ndian industries. *ages of
industrial labour has increased substantially as they have become very productive. Eock
out and strikes have declined to insignificantly low levels because industrial labor is
happy. !hose who cannot be efficient and past their prime age tio retrain themselves in
modern methods and processes have been retired with very attractive voluntary
retirement schemes. !he trade unions are finding it difficult to influence industrial
workers into agitation because labor has started benefiting from the positive fallout of
globalisation on the prosperity and growth of the industrial sector. !alented and merited
labor is commanding premium compensation in the labor market. Several new type of
industries have also come up. Small scale industries of the past has fast grown into
medium scale companies. 0ncidence of industrial sickness has gone done drastically.
>owever, the communists will not agree to this view because with industrial workers
becoming richer following increasing demand for and the wages of industrial
labour.resulting from liberalisation and globalisation.
0ndia has done very little reforms in agriculture to enable private and individual economic
initiative that would help harness the benefits of globalisation. 1espite this govt. created
hurdles to globalisation, 0ndian agriculture has benefited substantially from whatever
little globalisation that has ben allowed in 0ndian agriculture.!he farmers that got the
exposure to global links of markets, technology and investment, benefited in terms of
improving their yields, getting better prices and secured offtake. 0n many areas of the
country, tomatoe growers, potato farmers and fruit growersfarmers benefited from tie&up
and collaborations with ketchup, potato chips, fruit )uices, etc. 0ndian agricultural exports
have grown where 0ndian farmers in selected pockets are competitiveJ these include
spices made from agricultural produce, flowers, mangoes, other fruitsrice, vegetables,
pickels, papads, tobacco, etc. !he e&choupals network created by an 0ndian company and
the spread of mobile telephones have provided on line market price and climatic
information on on&line real&time basis and helped them to get the best prices and sell to
the most attractive buyers and brought them freedom from the clutches of the middlemen
and traders. 7ecause of the resistance from the traders and the politicians, more and more
farmers are not getting the benefits of globalisationJ vested interests are stopping the
entry of more professional and honest buyers of agricultural produce of high uality for
supply to urban areas through network of malls. +ishermen in Perala have increased their
incomes using mobile phones to find out the best mandis where the prices are the highest
on each day. !here have not been any negative effect of globalisation on 0ndian farming.
7ut faulty and restrictive policies of 0ndian politicians have made it difficult for farmers
to consolidate their holdings for larger scale commercial farming, acess to large, high
paying buyers with retail chains, support of well&organised transparent mandis not ruled
by traders. #s a result in many areas farmers have committed suicides because of crop
failuers and high indebtedness. Msing the old 7ritish 0ndian laws of land acuisition, the
state govts. are forcing farmers to sell their lands for industries at prices they consider
)ustified rather than asking industrialists and companies to bid for agricultural land which
will increase the market prices of land,. @nce these policy impediments are removed,
globalisation will proceed in #griculture and farming in the proper way and benefit 0ndin
agriculture and farming throughout the country. 0ndia does not need all the land under
agriculture now for agricultural useJ much less area would suffice to feed the nation and
export if agricultural productivity can be raise substantially through private investment in
agriculture by companies that need agricultural produce for their business growth and
0ndiaKs economic growth.
!o reiterate, !here are absolutey no negative effects of globalisation on 0ndian farming.
!he politicians are spreading rumours to get votes from farmers promising to save them
from the threats of globalisation. !here is however threat to farmers to some extentJ they
may have to sell land against compensation to allow industrialisation to progress. !here
would also be displacement of agricultural labor as a result and they have to be
compensated, rehabilitated and absorbed in the expanding industrial, construction and
other service sector. 7ut all these have to take place whether 0ndia globaliNes or not.
0ndiaKs economic growth in future will demand significant rise in agricultural productivity
so that some part of agricultural lands can be diverted for industrial growth and
residential accomodation. *ithout releasing agricultural land for industry, development
of roads etc,. agriculture itself will suffer along with the farmers. !he farmers should be
careful that they get fairly compensated instead of getting fooled by govts. and industries
saying that they are offering more than market price. !here is no active market for
agricultural land in 0ndia. 0ndustries and Govt. should be in competitive bidding process
to buy any agricultural land to get reakl fair price which may be much higher than what
they are getting now.
+arming in 0ndia urgently needs consoldation of holdings, large siNed farms and
considerable investments that would raise 0ndiaKs farm output many fold even after giving
up a part of agricultural lands for industrial and infrastructure development. !he
foodprices world over are going to shoot up. 0ndian farming needs to be allowed to make
the maximum gains. !oday, politicians are keeping the urban poor happy by keeping most
farmers poor that helps keep food prices low. 7ut this policy will soon fail and 0ndia may
have to import grains if farming sector does not radically improve its productivity.
0ndia has done very little reforms in agriculture to enable private and individual economic
initiative that would help harness the benefits of globalisation. 1espite this govt. created
hurdles to globalisation, 0ndian agriculture has benefited substantially from whatever
little globalisation that has ben allowed in 0ndian agriculture.!he farmers that got the
exposure to global links of markets, technology and investment, benefited in terms of
improving their yields, getting better prices and secured offtake. 0n many areas of the
country, tomatoe growers, potato farmers and fruit growersfarmers benefited from tie&up
and collaborations with ketchup, potato chips, fruit )uices, etc. 0ndian agricultural exports
have grown where 0ndian farmers in selected pockets are competitiveJ these include
spices made from agricultural produce, flowers, mangoes, other fruitsrice, vegetables,
pickels, papads, tobacco, etc. !he e&choupals network created by an 0ndian company and
the spread of mobile telephones have provided on line market price and climatic
information on on&line real&time basis and helped them to get the best prices and sell to
the most attractive buyers and brought them freedom from the clutches of the middlemen
and traders. 7ecause of the resistance from the traders and the politicians, more and more
farmers are not getting the benefits of globalisationJ vested interests are stopping the
entry of more professional and honest buyers of agricultural produce of high uality for
supply to urban areas through network of malls. +ishermen in Perala have increased their
incomes using mobile phones to find out the best mandis where the prices are the highest
on each day. !here have not been any negative effect of globalisation on 0ndian farming.
7ut faulty and restrictive policies of 0ndian politicians have made it difficult for farmers
to consolidate their holdings for larger scale commercial farming, acess to large, high
paying buyers with retail chains, support of well&organised transparent mandis not ruled
by traders. #s a result in many areas farmers have committed suicides because of crop
failuers and high indebtedness. Msing the old 7ritish 0ndian laws of land acuisition, the
state govts. are forcing farmers to sell their lands for industries at prices they consider
)ustified rather than asking industrialists and companies to bid for agricultural land which
will increase the market prices of land,. @nce these policy impediments are removed,
globalisation will proceed in #griculture and farming in the proper way and benefit 0ndin
agriculture and farming throughout the country. 0ndia does not need all the land under
agriculture now for agricultural useJ much less area would suffice to feed the nation and
export if agricultural productivity can be raise substantially through private investment in
agriculture by companies that need agricultural produce for their business growth and
0ndiaKs economic growth.
#s for the services sector, it is because of opening up of the economy that has allowed
globalisation to transform the services sector with the most rapid growth in
telecommunications, internet, mobile telephone, #!Ms, insurance, capital markets,
retailing, airlines,and of couse the software and 7"@ services industyry and
entertainment industry creating wealth, income and employment opportunities. 0f there
was no globalisation, most of these activities would have remained dormant and
inefficient under govt. monopolies or private oligopolies. !he exports from 0ndia has
grown tremendously after 0ndia slowly started opening up to globalisation. Except for the
old haggards of (ehruvian planning socialist politicians and the old haggards of outdated
and irrelevant, Marxist&Eeninist&Stalinist& Maoist ideology addicted politicians earning
livelihood and comfortable living by fooling illiterate, poor masses, and who continues to
hurt 0ndiaKs economic growth, everyone knows that globalisation has been a boon to
0ndian industry, 0ndian consumers, 0ndian agriculture 8could have been more:, 0ndian
services sector, 0ndian exports, 0ndian achievements in many other fields including
running businesses abroad. 0ndia now has a top rated capital market that was till mid
,224s was a shoddy place. 0ndia leads in the international software industry. Small and
medium industries in steel, engineering, pro)ect execution, travel, tourism, hotels, food
processing, etc are thriving. #ll these are the effects of globalisation & not withstanding
the hurdles created by the Govt. of 0ndia and the state Govt.s, or the politicians or the
economists or the "lanning 9ommission or the bureaucrats.
!here are some people in 0ndia and abroad who try to pro)ect that international trade and
globaliNation are more beneficial to rich nations and big multinationals. !hese views are
not substantiated by facts or ant consistent theory. !hese views are propounded generally
by a set of intellectuals who want to control the lives of the common citiNens of their own
countries and theselves en)oy royal life. Globalisation makes the life of these power
hungry politicians and pusedo intellectuals. 0t is globalisation that has given the 0ndian
software, steel making, and other corporations to establish theseves as competitors to
foreign multinationals. 0t is the developed countries which are losing )obs because of
globalisation. 0t is because of globalisation that 9hina has got the chance to become a
ma)or industrial nation supplying goods to rich world. !he poor 9hinese, =ietnamese, Sri
Eankans and 0ndians are getting the benefit of globalisation more than the #mericans or
the 7ritish or the Oapanese. 0n a globally competitive world, inefficient, incapable
andintellectually poor leaders of the poor countries will be losing their )obs to more
capable fellow citiNens. !hat is why they are trying to stop globalisation. 7ut people will
not be fooled for long. !hey will accept only globally competitive leaders & others have to
uit their leadership based on protected monopoly of political and intellwectual
businesses in their respective countries. *hen monoplists and oligopolistic cartels are
threatened, they naturally become activists and hire activist workers to protect the status
uo for their own survival. !he activists groups making extravanNa tourism with their
fluffy lectures and shouting whenever *!@ meets, are also a set of selfish, corrupt, non&
transparent bodies of uncompetitive people trying to protect their turf of fooling and
exploiting the common people. #nd, most common people )ust care a fig for these self&
appointed activist groups.
!he praxis of globaliNation has caught up with virtually all countries of the world today,
which are faced with the realities of increased integration of world trade and capital flows
facilitated by the rapid growth of information technology and the opening up of hitherto
closed economies. !he trend of increased integration of national economies with the rest
of the world is gradually evolving into a coherent global economy that is hinged on free
markets, investment flows, trade and information. !his has the tendency of shifting
autonomous economies into the global market by systematically incorporating such
autonomous economies into a global system of production, distribution and consumption.
#lthough globalisation is not a new phenomenon, the speed with which it has engulfed
countries of the world as a result of fast growing information technology has generated
concerns as to its effects on underdeveloped economies.
!he most discernible characteristic of underdeveloped economies is lack of the
infrastructure and motivation for the production of goods and services. !his has
constituted into a serious setback to industrial production in such countries, which has
manifested into difficulties in meeting the basic needs of their domestic economies for
goods and services. # cycle of persistent underdevelopment is emerging in these
countries as a result of persistent non utilisation of their domestic resources for
production purposes. !o meet basic consumption reuirements, demand for goods and
services produced by other economies becomes inevitable, but development of any
society evolves from the society%s peculiar needs and the strategies towards meeting such
needs by the society. Goods and services produced by other societies based on certain
consideration have limitations in responding to developmental needs of another society.
1ue to lack of industrial production, the underdeveloped economies cannot reap the
benefits of learning&by&doing and other positive externalities such as knowledge
spillovers, 'esearch and 1evelopment 8'Q1: and technological leapfrogging. !he
unutilised resources of the underdeveloped economies find their ways to the developed
*#S>0(G!@(J # recent worldwide poll may have come as a shock to those who view
the anti&globaliNation demonstrations as emblematic of a general souring mood about
global economic integration. !he "ew survey found that not only was the attitude
generally positive but there was more enthusiasm for foreign trade and investment in
developing countries than in rich ones.
# close look at the economies of those countries shows whyJ the fast&growing economies
in the world in this era of globaliNation are developing countries that are aggressively
integrating with the world economy.
>owever, the survey also found common
anxieties around the world that protesters
often highlight but a ma)ority of the
polled did not blame economic
integration for it. 0t is increasingly clear
that while this integration brings benefits,
it also reuires complementary
institutions and policies in order to
enhance the gains and cushion some of
the risks of greater openness.
!he "ew 9enter for the "eople and the
"ress surveyed D/,444 people in ..
nations, with excellent coverage of the
developing world in all regions. 0n
general, there is a positive view of
growing economic integration worldwide. 7ut what was striking in the survey is that
views of globaliNation are distinctly more positive in low&income countries than in rich
ones.
*hile most people worldwide viewed growing global trade and business ties as good for
their country, only 6/I of people in the M.S. and *estern Europe thought that such
integration was Lvery good.L 0n =ietnam and Mganda, in contrast, the figures for Lvery
goodL stood at ?-I and -.I, respectively. #lthough these countries were particularly
pro&globaliNation, developing #sia 8D3I: and Sub&Saharan #frica 8?-I: were far more
likely to find integration Lvery good,L
than industrialiNed countries. 9onversely,
a significant minority 863I of
households: in rich countries thought that
LglobaliNation has a bad effect on my
country,L compared to negligible
numbers of households with that view in
developing #sia 82I: or Sub&Saharan
#frica 8,4I:.
1eveloping nations also had a more
positive view of the institutions of
9hart ,. SourceJ !he "ew Global #ttitudes
"ro)ect Enlarged image
9hart 6. SourceJ !he "ew Global #ttitudes
"ro)ect Enlarged image
globaliNation. 0n Sub&Saharan #frica 3?I of households thought that multinational
corporations had a positive influence on their country, compared to only ?.I in rich
countries. =iews of the effects of the *!@, *orld 7ank, and 0M+ on their country were
nearly as positive in #frica 836I:. @n the other hand, only 6/I of respondents in #frica
thought that anti&globaliNation protestors
had a positive effect on their country.
"rotesters were viewed more positively
in the M.S. and *est Europe 8D?I:.
!his "ew attitudes survey is consistent
with the findings from *orld 7ank and
other research on globaliNation. 0n
general, the developing countries that
have increased their participation in trade
and attracted foreign investment have
accelerated growth and reduced poverty.
Mganda and =ietnam are two of the best
examples, so it is not surprising that
integration is viewed positively there.
More generally, globaliNing developing
countries are growing significantly faster
than rich ones. 0n a paper for the *orld
7ank , L!rade, Growth, and "overty,L #art Praay and 0 define the top third of developing
countries in terms of trade integration as the Lmore globaliNedL countries. !his group has
seen an acceleration of its per capita growth rate, reaching a population&weighted average
of ?I annually in the ,224s. 7y contrast, rich countries grew at 6I, and the rest of the
developing world, at & ,I. @ver D billion people are included, for 7angladesh 9hina,
0ndia, 7raNil, and Mexico are part of this category.
!he anti&globaliNation movement often claims that
integration leads to growing ineuality within countries,
with no benefits going to the poor. Generally, this is not
true. !here are certainly some countries in which
ineuality has risen, like 9hina and the M.S., but there is
no worldwide trend. Most important, in the developing
countries that are growing well as a result of integration
and other reforms, rapid growth translates into rapid
poverty reduction. !he total number of extreme poor
8living on less than F, per day measured at purchasing
power parity: increased throughout history up to about ,2/4. Since ,2/4 that number
declined by 644 million, while world population increased by ,./ billion. !he progress is
heartening, but there are still ,.6 billion people living in poverty
(otwithstanding the positive views of globaliNation in the developing world, the survey
shows that there are common anxieties around the world concerning the availability of
good )obs, )ob insecurity, old age support, and other uality of life issues. 0nterestingly,
9hart D. SourceJ !he *orld 7ank Enlarged
image
people tend not to blame globaliNation for lack of progress in these areas, but rather poor
governance in their own countries. *orld 7ank research shows that openness to trade
alone is not going to have much impact if that openness is not complemented by other
factors like a sound investment climate & meaning the environment of regulation,
infrastructure, and financial services & and effective provision of basic services, especially
for the poor.
Globalisation and
1eveloping 9ountries
7roader and deeper globalisation of commerce and industry, and of the world economy,
are essential to strengthen the economic performance and prospects for many of the
world%s developing economies, and through this lifting the living standards of their
peoples. 9losed economies, and those burdened by protectionism, will underperform
against their potential, imposing substantial costs, in terms of lost opportunities, on their
business communities and ordinary citiNens.
Globalisation means governments% maintaining competitive and open economies,
building upon
market&oriented policies. 0t also means recognising the constructive role global
enterprises and
electronic commerce can play in creating new opportunities, and through this stronger
economic growth and faster development.
!he importance of globalisation and economic development is underscored by a recent
@E91 study which looks at the potential for five of the world%s big emerging economies,
namely 7raNil, 9hina, 0ndia, 0ndonesia and 'ussia.
!he @E91 pro)ects a massive shift in global commercial and economic weight over the
next 64 years, with the output of those $big ? emerging economies% rising to eual that of
the industrialised @E91 nations T which includes the Mnited States, much of the
European Mnion, as well as Oapan, South Porea and #ustralia.
Mnderstandably, the $big ?% will expect comparable standing in issues T commercial,
economic and political T affecting the world economy and community of nations to that
of the existing industrialiNed nations.
!he dramatic transformation of the dynamic East #sian economies over the past half&
century clearly demonstrates the commercial, economic and social dividends of
globalisation.
Economic 1evelopments
@n the economic front, economic, employment and export growth have grown strongly,
while the
social dividends include declining rates of illiteracy and poverty, and longer life
expectancies. "er
capita incomes in the dynamic East #sian economies have shown faster long term growth
than many western industrialised nations.
'eal economic growth in East #sian economies averaged over 3 per cent annually during
the ,? years to ,2/4, and then over / per cent annually in the following ,/ years to ,22/,
more than double the rates of western industrialised countries.
E E # 1 0 ( G # M S ! ' # E 0 # ( 7 M S 0 ( E S S
Globalisation and 1eveloping 9ountries 8Oune 44:
!he primary engines of these superior growth rates were a strong export orientation and
pro&foreign investment policies. Seven of the world%s top ,4 exporting countries,
measured by shares of exports in G1", in ,223 were located in #sia T including all of the
top ?, in descending order, Singapore, Malaysia, >ong Pong, 0ndonesia and !hailand.
+or many developing nations, the most cost&effective social safety net is the depth and
breadth of the country%s linkages with the global economy, allowing them to respond
flexibly and uickly to
economic Wll&winds through new exports and capital inflows.
Governments have a substantial role to play in facilitating globalisation. "olicy settings
must be
adaptable, reinforcing competitive markets and emphasising market&oriented measures.
Sound economic policies must be accompanied by balanced and transparent laws and
regulations, which are administered without fear or favour by an impartial )udiciary, and
an adeuately resourced and honest constabulary.
9orruption in all its forms undermines broad and soundly based economic development,
and its
elimination should be a high priority for all governments. #t the same time, democracy
and good
governance, as well as respect for civil liberties, can help to reinforce competitive, market
mechanisms.
(ear term economic development priorities should include promoting economic stability,
removing price controls, and liberalising production and marketing system, especially for
agricultural products, while medium to longer term strategies should embrace privatising
state owned enterprises, reforming sclerotic financial systems, and rethinking the role of
the state.
7usiness can also play a constructive role in assisting developing countries to realise the
benefits of globalisation.
Global businesses, whether large or small, bring many benefits to host countries,
particularly
developing nations, including greater access to foreign capital, technology and export
networks,
through which they generate flow&on benefits to local firms and people.
'esearch by the @E91 shows foreign firms create new )obs faster, and pay wages higher
than,
domestic firms 8up to 6? per cent more in some cases:. @ther benefits include superior
training and career opportunities for local people.
Export&oriented manufacturing and services also perform a valuable role in developing
the labour skills, technology and general market experience and expertise which can
move developing countries into a virtuous upward cycle of productivity and income
growth.
# simple example sufficesJ while westerners once derided #sian economies for producing
simple
garments, footwear and toys, they now confront fierce competition from high&brand name
players in computer euipment and electronics, and increasingly from software and other
information
technologies.
Global enterprises also play a valuable role in promoting the upward, not the downward,
convergence toward world standards of labour and environmental practices in developing
countries.
E E # 1 0 ( G # M S ! ' # E 0 # ( 7 M S 0 ( E S S
Globalisation and 1eveloping 9ountries 8Oune 44:
1eveloped countries can constructively assist developing countries to build local
capacities to realiNe the commercial, economic and social dividends of globalisation.
+or the least developed countries, this should include targeted foreign aid programs
which help those nations build fundamental capacities for self&sustained economic
growth and development.
+or other developing countries, this should also include developed countries widening
and deepening efforts to liberalise domestic and international markets for trade and
investment, so emerging economies can better realise their competitive advantages in
trade and commerce.
!he #ppropriate 'esponse
0n so far as developed countries feel threatened from new found competition from
developing countries, the appropriate response must not be to raise protective barriers,
but rather to improve the flexibility of labour and product markets, and focus on
rationalising and reducing government intervention in national economies.
#n ambitious and comprehensive multilateral round of trade and investment liberalisation
negotiations, would assist developed countries to realise the dividends of globalisation by
strengthening the binding rules of the global trading system.
!he multilateral trading system advantages developing countries by levelling the playing
field so both large and small, industrialised and developing, countries all compete on a
similar footing. +or many developing countries, an effective multilateral regime is a solid
defence against unilateralism from larger, more aggressive nations.
0f anything, the comparatively small commercial and economic siNe of most developing
countries
means they gain proportionately more than larger countries from the rules&based system.
!he benefits of freer trade for developing countries are substantial. !he @E91 has
estimated
eliminating tariff barriers alone to trade would raise world economic growth by D per cent
per annum, with even larger gains accruing to developing countries both in #sia and
#frica.
+or example, 0ndia would gain a $free kick% euivalent to almost ,4 per cent of its G1",
while for
9hina the benefits would be a still&substantial nearly - per cent, both of which would
greatly assist to reduce pressures on unemployment and poverty in these mega&
economies.
!hose developing countries which have embraced economic liberalisation and openness
have en)oyed economic growth rates much faster than those who have maintained closed
or protectionist policies.
!he *orld 7ank has estimated those developing countries which pursue liberal and open
economic policies en)oyed average economic growth rates of around ..? per cent
annually during the ,234s and ,2/4s, far and away in excess of the 4.3 per cent figure for
those developing countries which adopted inward oriented, protectionist policies.
0nternational agencies, both governmental and private sector, can usefully provide
developing countries with advice on pro&market, efficiency&enhancing and outward&
oriented commercial and economic
E E # 1 0 ( G # M S ! ' # E 0 # ( 7 M S 0 ( E S S
Globalisation and 1eveloping 9ountries 8Oune 44:
policies. Sound education, training, health, and public finance and governance policies
and structures are necessary elements of such policy frameworks.
#d)ustment assistance, where legitimate and necessary, should help position developing
economies to achieve self&sustained economic growth and development, and not to create
ongoing welfaredependencies.
Global businesses, whether large or small, bring many benefits to host countries,
particularly
developing nations, including greater access to foreign capital, technology and export
networks,
through which they generate flow&on benefits to local firms and people.
GlobaliNation concerns have taken a far more positive path recently. 0n contrast to the
destructive protests in ,222, activists have begun to realiNe that it is the world
governments who are the backbone of international organiNations such as the G/, the
*orld 7ank, and the 0M+ and that efforts must be directed toward both the organiNations
and the member governments in order to achieve policy ob)ectives. 0n Ouly 644?, on the
eve of an important G/ summit in Scotland, a massive music festival was organiNed to
express public support for issues such as debt relief, aid for #frica and cooperation on
cutting greenhouse emissions. #lmost as if in response, the G/ heads of state announced
important initiatives in these areas.
#dvocates for debt cancellation maintained that it was unrealistic for these countries to
assume the burden of debt service and at the same time take meaningful steps to provide
needed basic services to their citiNens. 7ut others note that such debt cancellation rewards
the countries with the poorest record of governance at the expense of other countries
which are more responsible yet still struggling. !he latest M( statistics reflect an every
widening gap between the rich and poor countries and most believe that far more than
debt cancellation will be necessary to )ump&start the economies in the poorer countries.
!he LglobaliNationL of the world economy has moved inexorably forward in the past two
years. !he economies of #sian countries such as 9hina, 0ndia, Malaysia, and !hailand are
booming. 0n the process, they are significantly increasing global demand for energy thus
adding to the ever present global environmental concerns. 7ut progress has been uneven.
7eset by #01s, poor governments and war, the economy in many #frican countries has
deteriorated. *ithin the more successful countries, the benefits of growth has not reached
all citiNens. !he manufacturing )obs created in these countries generally pay low wages
and offer workers little protection against exploitation.
*ith respect to trade issues, many of the less&developed countries have created the
greatest recent resistance to the global pressure to reduce trade barriers through *orld
!rade @rganiNation 8*!@: agreements. !he main problem relates to agricultural
products. Many of these countries have experienced a severe downturn in their domestic
agricultural acreage because local producers cannot compete with agricultural exports
from ma)or countries such as the Mnited States. !hey have persuasively argued that it is
not a fair playing field because in Europe, Oapan and the Mnited States, agriculture
receives siNeable government subsidies. !hird world countries cannot afford to similarly
subsidiNe their own domestic agricultural industries. !he matter came into focus at the
*!@ summit in 9ancun, Mexico in September 644D. Mid&level developing countries
such as 7raNil, South #frica, 0ndia and 9hina ob)ected to any progress on reducing tariff
barriers in general until the agricultural problem was resolved and the talks collapsed. #t
the subseuent *!@ summit in Geneva, SwitNerland in Ouly 644., a breakthrough was
reached. !he deal, approved by all ,.3 members, will cut rich countriesK farm subsidies in
return for developing countries opening markets for manufactured goods. !he
implementation of the agreement presents obvious internal political challenges in the
developed countries.
!he march toward free trade continues to provoke anxiety among displaced and
potentially displaced workers in the developed economies. 0n the 644. "residential
campaign both candidates supported trade liberaliNation, but the 1emocratic candidate
Oohn Perry also supported removing tax incentives which might encourage companies to
export )obs. !he 644. 1emocratic platform also proclaims that new trade agreements
must protect internationally recogniNed workersK rights and environmental standards as
vigorously as they now protect commercial concerns. 1emocrats are mostly opposed to
the 9entral #merican +ree !rade #greement 89#+!#: which narrowly passed the Senate
and the >ouse in 644?.
>ow did concerns about LglobaliNationL developH
# loosely organiNed grass roots movement began to emerge among leftists or
LprogressivesL in the late ,224Ks. !he effort inspired students and activists in a manner
reminiscent of the civil rights and anti&=ietnam war crusades of the X-4Ks. 0n (ovember
and 1ecember ,222, activists significantly disrupted a week&long meeting of the *orld
!rade @rganiNation in Seattle. Subseuent protests have occurred in *ashington 1.9.,
Europe and 9anada. !he general concern is that the growing international economy and
the organiNations that support it are dominated by corporate economic interests who are
escaping the scrutiny and regulation provided by national governments. 7ut the
motivations of those in the Lanti&globalL movement varyJ
%rade #nions tend to be Lanti&globalL because of national )ob loss. !he ma)ority of
union employment is in the manufacturing sector of the economy. !his is the
sector of the economy which has been most adversely affected by globaliNation as
international companies increasingly take advantage of unskilled labor abroad,
especially in low wage countries. !he service sectors of the economy which have
benefited from freer trade tend to be less represented by organiNed labor.
Many environmental organi/ations have participated in the anti&global movement
because they believe that the *orld !rade @rganiNation has promoted policies
which enable corporations to escape national restrictions on business practices by
calling such restrictions Ltrade barriersL. !hey also accuse global companies of
dominating the politics of third world governments. +or example, many
environmental activists accuse Shell @il 9ompany of promoting a regime which
executed the (igerian environmentalist Pen Saro&*iwa. #t the same time,
however, most environmental organiNations recogniNe that cooperation fostered
by international institutions is critical to effective environmental control so it
would be inaccurate to classify most environmental organiNations as Lanti&globalL.
0ocial activists, including 'alph (aderKs "ublic 9itiNen organiNation, are chiefly
concerned that the social protections which help protect workers and the poor in
Europe and the Mnited States will become eroded because workers in the
emerging countries will not have these protections.
1oor nations and their advocates argue that free trade is a benefit for richer
nations at the expense of poorer nations because tariff barriers are necessary for
poor countries to develop their economies. !hey complain that the agricultural
subsidy policies of the rich countries flood their markets with artificially low cost
agricultural products, thus ruining domestic agricultural industries. !hey also
argue that *orld 7ank lending policies force poor countries to adopt economic
policies which benefit only their wealthy trading partners and leave them with an
overwhelming burden.
Many isolationists oppose globaliNation because of a concern that the M.S. will
lose its ability to control its own destiny and economy.
#ll these interests have succeeded in focusing unprecedented and needed attention on two
modern developments which had been previously too often overlookedJ ,: the growing
interdependence of the worldKs nations and 6: the alarming disparity between rich and
poor countries.
*hat international organiNations are involved in the globaliNation controversyH
*orld !rade @rganiNation 8*!@: !he *!@ was established in ,22? as a
successor to G#!! 8General #greement on !reaties and !ariffs:. !he treaty now
includes most nations. Most nations who are not members have observer status
and are applying for formal membership. 89lick to see map: 7y treaty, its
members have given *!@ the power to monitor trade policies and handle
disputes between nations and between industries. !he overall goal of the *!@ is
free trade through the reduction of tariff and non&tariff barriers to trade.
*orld 7ank !he *orld 7ank is an organiNation affiliated with the Mnited (ations
for the purpose of making loans to developing countries which are guaranteed.
!he bank is self&sustaining and has maintained a profit on its lending activities.
!he bank is owned by the member nations which include virtually all nations with
the exception of 9uba and (orth Porea. =oting on bank policy is based on capital
subscription. Seven countries, Mnited States, Germany, Oapan, Great 7ritain,
9anada, 0taly and +rance, have .?I of the voting power. !he Mnited States is a
,3I shareholder. Many loans now issued by the *orld 7ank involve structural
ad)ustment conditions which generally reuire countries to devalue their
currencies against the dollar< lift import and export restrictions< balance their
budgets and not overspend< and remove price controls and state subsidies.
0nternational Monetary +und 80M+: !he 0M+ is closely affiliated with the *orld
7ank. 0t is also owned by virtually the same member nations as the *orld 7ank
and has a similar shareholder and voting arrangement based on the siNe of each
memberKs economy. !he 0M+Ks primary responsibility has been to maintain stable
currency exchange rates between countries. !he 0M+ also issues loans designed to
help countries restructure their economies to increase exports and draw foreign
investment. 9ountries that take out such structural ad)ustment loans give the 0M+
influence over their economic policies.
(#+!# !he (orth #merican +ree !rade #greement is an agreement between the
Mnited States, 9anada and Mexico to integrate their respective economies through
the lowering and eventual removal of tariff barriers. Since 1ecember ,22., there
have been negotiations to expand (#+!# into a L+ree !rade of the #mericas
8+!##:L agreement which would include all *estern hemisphere countries with
the exception of 9uba.
@rganiNation for Economic 9ooperation and 1evelopment 8@E91: !he @E91 is
a group of D4 member countries in an organiNation that provides
governments a setting in which to discuss, develop and perfect economic and
social policy. 0t serves primarily and as forum for gathering information and
coordinating economic policies.
!he LGroup of EightL 8G&/: !he G&/ refers to the Group of Eight leading
industrialiNed countriesJ 0taly, +rance, the Mnited States, the Mnited Pingdom,
'ussia, 9anada, Oapan, and Germany. !he group was formed during the ,23D oil
crisis with six members to coordinate economic policy. 0t became the G&3 in
,233, when 9anada )oined, and the G&/ in ,22/, when 'ussia signed on. !he G&/
has no headuarters, budget or permanent staff. !he groupKs main focus now is
stabiliNing and expanding the world economy and managing international trade,
although they also deal with other topics that come up each year.
>ow has world trade increasedH
1uring the past three decades, the increase in world trade has outpaced overall economic
growth. 89lick to see chart: . !his is true in the M.S. was well. Exports and
imports now account for more than ,4I of M.S. economic activity. !he Mnited
States and other large economies account for a high percentage of world trade 89lick
to see chart:. #ll these countries have very low tariff rates . Manufacturing has been
responsible for both the increase in exports and imports .
>asnKt expanded M.S. trade led to a substantial increase in the trade deficit which
undermines the M.S. economyH
Since the mid&34Ks, the M.S. has imported more goods that it has exported. !his balance
began to improve in the early X24s but has again significantly increased. Some
believe the trade deficit is evidence that #merican companies are failing to compete in
global markets or that M.S. exporters face LunfairL trade barriers abroad. @ther
economists observe that it is the sign of a healthy economy which has the resources to
purchase a large volume of goods. 0n fact, they note that from ,226 to ,223, the M.S.
trade deficit almost tripled, while at the same time M.S. industrial production increased by
6. percent and manufacturing output by 63 percent.
*hat has been the effect of (#+!#H
#s a result of (#+!#, M.S. trade with Mexico has substantially increased as tariff
barriers have been lowered. !rade with 9anada, by far the ma)or M.S. trading
partner, kept pace with the overall trade increase and trade with Mexico far outpaced the
overall substantial growth in M.S. foreign trade. !he ma)ority of all Mexican and
9anadian imports are from the M.S. #s many remaining tariff barriers are removed
under the (#+!# schedule, indications are that trade with Mexico will continue to grow
substantially.
>as the growth in trade during the K24Ks cost M.S. )obs or lowered M.S. wagesH
9learly certain manufacturing )obs have been lost to Mexico and elsewhere as
multinational companies are attracted by the lower wage levels for unskilled labor.
#ccording to the Economic "olicy 0nstitute, there has been a net )ob loss of 3--,444 in
the Mnited States which can be directly attributable to the (#+!# agreement. !he
Economic "olicy 0nstitute also blames globaliNation for the growing disparity of income
in the Mnited States.
@n the other hand, (#+!#Ks supporters point to the fact that the rise in trade has led to
increased employment in all three countries. #ccording to a recent )oint
government report, in Mexico more than half of the new )obs were related to export
activity. !he report also maintains that in the Mnited States, a total of 6.2 million )obs
8including 2,.,444 new )obs: are supported by merchandiNe exports to 9anada and
Mexico. 1uring the (#+!# years, real wages in the Mnited States finally began to inch
upwards.
0n fact, there is no clear answer regarding free tradeKs overall effect on employment and
real wages in the Mnited States. !here are many other more important influences on
employment and income distribution, not the least of which are domestic tax and labor
policies.
!he controversy over (#+!# has resurfaced in 644? as 9ongress debates the recently
negotiated 9#+!# treaty which includes the 9entral #merican countries of Guatemala,
>onduras, El Salvador, (icaragua, 9osta 'ica, "anama and the 1ominican 'epublic.
>as the *!@, the *orld 7ank, or free trade created extensive environmental problemsH
!here are two ma)or environmental concernsJ
0s free trade changing economies in third world countries without regard to
environmental protectionH
!here will always be conflict between economic growth and environmental
protection. !o the extent that free trade is changing and expanding the economies
of third world countries, there are unuestionably increased threats to the
environment. +or example, most of the greenhouse gas emissions which
contribute to global warming come from developed countries. #s poor
countries develop, their contribution to this problem is likely to increase.
Moreover, in the short term, such countries cannot afford costly efforts at
environmental control. @n the other hand, most serious environmental activists
recogniNe the need for poor nations to escape their cycle of poverty.
!he real concern is that the *!@ and the *orld 7ank are insufficiently concerned
with environmental conseuences as they support economic growth in these
countries. 0n particular, environmental organiNations are critical of *orld 7ank
lending for oil, gas and mining pro)ects because of the environmental, human
rights, and social impacts. !hey also maintain that development encouraged by
*!@ polices is depleting the worldKs forests and creating many other
environmental problems.
0n response to these criticisms, the *!@ notes that the agreement establishing the
*!@ includes among its ob)ectives, optimal use of the worldKs resources,
sustainable development and environmental protection. !he *!@ further notes
that it is the responsibility of international conventions, not the *!@, to ensure
international compliance with environmental agreements. !he *orld 7ank insists
that concern for environmental sustainability within developing countries is an
intrinsic part of the *orld 7ankKs mission to fight poverty with lasting results. !he
*orld 7ank maintains that its portfolio of pro)ects with clear environmental
ob)ectives amounts to MSF,- billion and accounts for about DI of all lending
each year. #s of Ouly 644,, there were a total of 2? active stand&alone
environmental pro)ects worth MSF?., billion. 0n addition, there were numerous
sector pro)ects with primary environmental ob)ectives, as well as global
environmental pro)ects & amounting to an additional MSF,, billion.
Environmental concerns regarding economic changes in third world countries are
clearly valid. (ational environmental policies in these countries are generally less
stringent than in most developed countries. Moreover, even with environmental
controls, moderniNation in these countries will significantly contribute to serious
problems such as global warming. !he criticisms directed at the *orld 7ank and
*!@ have been effective at raising the consciousness of these organiNations
regarding environmental concerns but the role of these organiNations appears less
important than the need for more effective international environmental treaties.
1oes the *!@ issue rulings which undermine national laws which provide
environmental protectionH
!he treaty which is the basis for the *!@ gives the *!@ the authority to rule
that certain laws which ostensibly provide environmental protection are in reality
non&tariff trade barriers. Environmental organiNations insist that this authority has
been abused and cite three examplesJ
o 2ene/#elan refined gas case !he *!@ held that standards imposed by the
M.S. E"# discriminated against =eneNuelan refiners. !he ruling held M.S.
could regulate air uality but that by adopting standards which were
identical to M.S. industry practices, there was an unfair advantage to
#merican refiners.
o 3ormone treated beef !he *!@ held that European restrictions on M.S.
beef was not based on a sound scientific basis and therefore amounted to
favorable treatment for domestic European beef producers.
o %he 0hrim$ and %#rtles case M.S. regulations reuire that shrimp be
caught through methods which do not endanger sea turtles. !his rule
applies to both domestic and imported shrimp. # *!@ panel found this
rule in violation of trade rules in that it imposed a unilateral standard. #n
appeals panel upheld the decision, but on narrower grounds that the MS
regulations had been applied in a discriminatory fashion.
!here are environmental concerns exemplified by these cases. 7ut a review of the
decisions indicates that each case was not decided arbitrarily but instead was
based on legal analysis and a thorough and detailed review of the evidence
presented.
0s globaliNation undermining social protections for workers in developed countriesH
0n a ,22- article in 4oreign 5ffairs, "rofessor Ethan 7. Papstein argues that the global
economy is creating millions of disaffected workers suffering from ineuality,
unemployment, and poverty. >e notes that rapid technological change and heightening
international competition are fraying the )ob markets of the ma)or industrialiNed
countries. !he spread of the dogma of restrictive fiscal policy is undermining the bargain
struck with workers in every industrial country. States are basically telling their workers
that they can no longer afford the postwar deal which provided social welfare and
comprehensive unemployment insurance.
@thers suggest that globaliNation has played much a smaller role in the decreasing social
protections and influence of organiNed labor in many industrialiNed countries. !hey note
that the bulk of trade is between countries where wages are already high. 0n the Mnited
States, many social and labor protections originated in the (ew 1eal era as a response to
more radical socialist proposals. !he welfare states in *estern Europe were created
during the post war period as a response to the 9ommunist threat emerging in Eastern
Europe. 0n the post&cold war period, these motivations no longer exist. +iscal
conservatives in *estern democracies who support reduced marginal tax rates, favorable
policies for business, and who oppose organiNed labor have obtained increased political
influence. !hese attitudes have had significant effect on domestic policies as well as trade
policies.
>ow do 1emocrats and 'epublicans differ on trade issuesH
!here is a split within each of the main political parties on free trade. !raditional
1emocrats, guided in part by the interests of organiNed labor, tend to oppose free trade as
a threat to the interests of domestic workers. L(ew 1emocratsL believe that trade
encourages economic growth thus rewarding ordinary #mericans with increased goods
and services and better employment opportunities. +ormer "resident 9linton, together
with past "residential candidates Gore and Perry, supported free trade. Spurred by
agricultural interests and multinational corporations, the ma)ority of 'epublicans also
support free trade but there remains a distinct minority who resist the globalism of the
#merican economy as a threat to national autonomy. !he divide within each party is
illustrated in Senate votes on (#+!# and on Lfast trackL trade authority.
#re *!@&sponsored free trade policies and *orld 7ank50M+ Lstructural ad)ustmentL
loans undermining the development of poor countriesH
"overty in the Lthird worldL or LsouthL is a ma)or global challenge. 9ompounded by
much higher birth rates, the disparity between developed and undeveloped countries has
unuestionably increased. Many globaliNation activists suggest that the *!@,
*orld 7ank and 0M+ are responsible.
+ree !rade and 1evelopment
9ountries are poor primarily because their human resources are uneducated,
poorly nourished and underemployed. !o complicate the problem, population
growth in poor countries is far greater than the rest of the world. !hese countries
have poor infrastructures and freuently are governed by unsophisticated and
corrupt leaders. !he modern efforts of the *orld 7ank and the *!@
unuestionably seek to change this cycle and create conditions where human
resources are far better utiliNed and internal LmarketsL develop. !here has been
substantial progress in certain countries. Even at very low wages, the introduction
of industry and an infrastructure in these countries have employed human
resources far more productively.
Some economists argue that developing countries need to rely on protective trade
barriers in order to develop industry. !hey suggest that in the ,2
th
century, M.S.
industrial development relied heavily on these protections. 7ut modern studies
suggest that M.S. industrial development would have occurred in absence of high
tariffs and may have in fact been impaired by tariff barriers. 0nstead, many
economists argue that the wave of protectionism which swept the world after
*orld *ar 0 fostered the global economic depression. !hey maintain that high
tariffs policies protect industries which are relatively inefficient at the expense of
the economy in general.
!he case of Mexico under (#+!# illustrates how freer trade has fostered growth
in that country. @ver the past five years real G1" has grown at ?.? percent per
year. Even including the sharp shock of the ,22? peso crisis, Mexican real G1"
has grown at D./ percent per year since the ratification of (#+!#. !he urban
unemployment rate that was - percent in ,226 and rose to /.? percent in ,22? is
now less than . percent. !he Mexican boom has been led by the manufacturing,
construction, transportation, and communications sectors. Most of all, the
Mexican boom has been led by exports. (ow MexicoKs real exports will be more
than three times as large as they were at the ratification of (#+!#, and as a share
of G1" exports have grown from a little more than ,4 to ,3 percent. More
importantly, these changes have created a foundation for a far more stable
political situation.
#lthough there is a very arguable link between free trade and development, it is
clearly not the only vehicle for improving poverty and human conditions in
undeveloped countries. +or decades, 9uba has experienced an economic boycott
from its most natural trading partner, the Mnited States, and is not a member of the
*orld 7ank or 0M+. 0ts economy has been hurt severely by the withdrawal of
Soviet support during the past decade. (evertheless, its numbers rank with
developed countries in health care and education and its development
program has even drawn praise from the *orld 7ank.
LStructural #d)ustmentL loans
*hile providing economically troubled countries with loans, the 0M+ and the
*orld 7ank reuire the countries to make fundamental changes in their economic
and social policies. !hese conditions come in the form of Structural #d)ustment
"rograms 8S#"s:. S#"s are designed to ensure that the recipient country pays
back its loans to the 0M+ and other international lenders. !hese policy
prescriptions are typically designed to promote exports, reduce government
spending and the governmentKs role in the economy, increase taxation and devalue
currency.
9ritics argue that governments must meet these reuirements by slashing basic
services and reducing worker protections such as minimum wages and benefit
packages. !hey argue that countries must undertake a variety of measures to
promote exports, at the expense of production for domestic needs. Some of the
loans reuire the imposition of Luser feesL charges for the use of government&
provided services like schools, health clinics and clean drinking water. 9ritics
note that for very poor people, even modest charges may result in the denial of
access to services. Mandated reductions in government spending freuently
reduce the services available to the poor, including health and education services.
Structural ad)ustment policies have also called for the sell off of government&
owned enterprises to private owners, often foreign investors. !he result is that
these countries have been precluded from developing consumer&friendly
enterprises in the typically monopolistic sectors of the economy such as utilities,
transportation and communication.
>owever, many believe that S#"s have been a positive force in development and
prevented many loans from being wasted by government inexperience and
corruption. # study of ,2/4s ad)ustment programs in .6 countries found
substantial success && with steadier growth rates, lower inflation, and
improvements in current accounts and trade regimes. #nd although times were
hard for many countries, both the bank and the receiving countries increasingly
agreed on the need for reform and the realiNation that money is only as beneficial
as the policies it supports. 0n recent years, the *orld 7ank has brought forth new
commitments to mitigate ad)ustmentKs social costs through better design of
programs, especially for governmental social spending.
"oor countries have been forced to assume an unreasonable debt burden.
!here is no uestion that this is a persistent problem especially for the poorest
countries. !he total debt is substantial and the cost of servicing these debts is a
substantial drain on the economies of these countries. !he ma)ority of
countries most severely affected are in the sub&Saharan region of #frica. 0n
644,, the 0M+ and the *orld 7ank approved debt&reduction packages for 6D poor
countries, ,2 of which are in #frica. !otaling FD. billion, these packages
will halve the debt owed by these countries, according to the 0nternational
Monetary +und 80M+:. !he measures form part of the >eavily&0ndebted "oor
9ountries 8>0"9: initiative. *ith other measures the effect will be to reduce the
debts owed by these countries, by about two thirds, on average. Similar to S#"s,
this relief is delivered only to those countries which have demonstrated the
commitment and capacity to use the resources effectively. 0n Oune 644? , the
finance ministers of the G&/ agreed to forgive the debts of ,/ impoverished
nations, ,. of them #frican. !he debts were owed to the *orld 7ank, the
0nternational Monetary +und 80M+:, and the #frican 1evelopment 7ank 8#+17:
and totaled about F.4 billion.
7ut many global activists argue that these measures are not enough. 0nstead, they
advocate a ,44I cancellation of all debts to the poorest countries and additional
debt relief for other depressed economies. !hey further maintain that there should
be no conditions attached to debt relief. !hey argue that because the >0=5#01s
crisis is ravaging poor #frican nations, there are no resources with which to pay
debt. !hey further maintain that cancellation of such debts will not render the
*orld 7ank or 0M+ insolvent. 7ut the 0M+ responds that total debt cancellation
for those countries alone would come at the expense of other borrowing countries,
including those non&>0"9s which are home to /4 percent of the developing
worldKs poor.
1o national foreign aid programs significantly help poor countriesH
Many nations in Europe and some in the Middle East and East #sia have significant aid
programs. 0n ,223, Oapan was the worldKs largest foreign aid donor, followed by +rance,
Germany, and then the Mnited States. +rance contributed FD billion in grants and loans to
former colonies in ,223 alone. Great 7ritain, on a much smaller scale, has provided aid to
former colonies. #bout ,?I of foreign aid is provided by *orld 7ank programs.
#lthough the rate of aid has increased in the past two decades, total official aid represents
a very small percentage of the worldKs economy.
0n the Mnited States economic development aid is provided increasingly as loans through
the #gency for 0nternational 1evelopment and the Export&0mport 7ank, which finances
the export of M.S. capital goods and agricultural products. 0n 6444, the two largest
recipients of aid were 9olombia and 0srael. 0n 6444, M.S. non&military foreign aid
amounted to F,,.3 billion 8less than ,I of the federal budget: and the share of the gross
domestic product 8G1": for foreign aid has decreased when compared to earlier
decades , and compares unfavorably with other developed countries. !here is
very little public support for an increase in foreign aid. 0n 9ongress, 1emocrats are
more likely than 'epublicans to support proposals to increase foreign aid.
1o activists support alternatives to the current global and national foreign aid systemH
#lthough there is vehement criticism of the *orld 7ank and the 0M+, there are no
uniform alternatives which have been proposed. Some groups actually advocate pro&
global solutions such as much greater funding of M.(. aid programs. !hose who advocate
cancellation or substantial reduction of *orld 7ank50M+ debts are in reality advocating a
change in the mission of these agencies from offering loans to instead providing direct
grants to needy countries. #ctivists have been particularly critical of Lstructural
ad)ustmentL lending policies but most offer no other suggested mechanism for insuring
that recipient countries responsibly use the aid that is received.
#lthough the general concern is that international institutions such as the *orld 7ank and
*!@ are dominated by corporate interests who are unresponsive to the protecting the
interests of the worldKs people, there is virtually no advocacy of a stronger Lworld
governmentL democratic structure which could potentially protect such interests. 0nstead,
the overall sentiment has been more anti&global than pro&global.
0s there an isolationist sentiment among #mericans concerned with LglobaliNationLH
"erhaps because it is a country formed of immigrants seeking to escape living conditions
elsewhere, there has always been an strong current of isolationism in the Mnited States.
#lthough the Mnited States emerged as a ma)or world power at the conclusion of each
*orld *ar, many in #merica, including those in leadership positions, have been reluctant
for the M.S. to assume an active role as a global leader. 0solationism was such a prime
ingredient in post&*orld *ar 0 foreign policy that the Mnited States refused to )oin the
Eeague of (ations which its president had helped create. 1uring most of the post *orld
*ar 00 era, the primary M.S. foreign affairs mission was to contain communist ideology.
1espite the fact that the Mnited (ations is headuartered in (ew Rork, the M.S. has
generally de&emphasiNed this organiNation.
!he opposition to the =ietnam *ar included isolationist attitudes. Some war opponents
disagreed with the =ietnam cause itself but many others opposed the war because of a
belief that the M.S. should not involve itself at all in the affairs of other countries. !his
sentiment continues to resurface whenever the M.S. puts the lives of #merican
servicemen at risk in places such as 7osnia, Somalia, and 0ra.
7ut there are indications that the combination of a booming global economy, shared
environmental concerns, and the threat of international terrorism are producing a rapid
change in global consciousness within the Mnited States. #mericans now favor free trade
and are more aware of international institutions
Free Trade and Globalization
Author and Page information
by #nup Shah
!his "age East Mpdated Monday, Ouly 46, 6443
!his pageJ httpJ55www.globalissues.org5issue5D/5free&trade&and&globaliNation.
!o print all information e.g. expanded side notes, shows alternative links, use the
print versionJ
o httpJ55www.globalissues.org5print5issue5D/
0t is yet another 9iviliNed "ower, with its banner of the "rince of "eace in one hand and
its loot&basket and its butcher&knife in the other.
6ar7 %wain, %o the 1erson 0itting in (ar7ness, "9+", describing the 8nited 0tates
$la!ing the E#ro$ean-st!le im$erialist game in the 1hili$$ines.
+or globalism to work, #merica can%t be afraid to act like the almighty superpower that it
is.Y!he hidden hand of the market will never work without a hidden fistMc1onald%s
cannot flourish without Mc1onnell 1ouglas, the designer of the +&,?. #nd the hidden fist
that keeps the world safe for Silicon =alley%s technologies is called the Mnited States
#rmy, #ir +orce, (avy and Marine 9orps.
%homas 4riedman, 9hat the 9orld :eeds :ow, :ew ;or7 %imes, 6arch 2<, "999.
=#oted from )ac7ing 8$ *lobali/ation with 6ilitar! 6ight
!he world is becoming more globaliNed, there is no doubt about that. *hile that sounds
promising, the c#rrent form of globaliNation, neoliberalism, free trade and open markets
are coming under much criticism. !he interests of powerful nations and corporations are
shaping the terms of world trade. 0n democratic countries, they are shaping and affecting
the ability of elected leaders to make decisions in the interests of their people. Elsewhere
they are promoting narrow political discourse and even supporting dictatorships and the
AstabilityB that it brings for their interests. !his is to the detriment of most people in the
world, while increasingly fewer people in proportion are prospering.
!he western mainstream media, hardly provides much debate, gladly allowing this
economic liberalism 8a largely, but not only, politically conservative stance: to be
confused with the term political liberalism 8to do with progressive and liberal social
political issues:. Margaret !hatcherKs slogan of Athere is no alternativeB rings sharply.
"erhaps there is no alternative for such prosperity for a few, but what about a more
euitable and sustainable development for allH
#rticles on A+ree !rade and GlobaliNationBJ
A Primer on Neoliberalism
East updated Monday, Ouly 46, 6443.
Global trading that allows all nations to prosper and develop fairly and euitably is
probably what most people would like to see. (eoliberalism is touted as the mechanism
for this. Margaret !hatcherKs !0(# acronym suggested that !here 0s (o #lternative. 7ut
what is neoliberalism, anywayH
'ead A# "rimer on (eoliberalismB to learn more.
Criticisms of Current Forms of Free Trade
East updated +riday, March D,, 644-.
*hile internationalism and euitable global trading allowing fair development is
probably what most people would like to see, the current model of corporate&led free
trade and its version of globaliNation that has resulted, has come under criticism by many,
many (G@s, developing nation governments and ordinary citiNens.
'ead A9riticisms of 9urrent +orms of +ree !radeB to learn more.
The WTO and Free Trade
East updated +riday, Ouly 6/, 644-.
!he *orld !rade @rganiNation, 8*!@:, is the primary international body to help promote
free trade, by drawing up the rules of international trade. >owever, it has been mired in
controversy and seen to be hi)acked by rich country interests, thus worsening the lot of
the poor, and inviting protest and intense criticism.
'ead A!he *!@ and +ree !radeB to learn more.
WTO Doha Develoment! Trade "ound Collase# $%%&
"osted +riday, Ouly 6/, 644-.
Supposed to be a 1evelopment round of trade talks, the almost five year&long 1oha round
collapsed at the end of Ouly, 644-. !he MS found itself on the defensive as around the
world blame was directed at the MS, in particular by the EM. >owever, the EM has also
been part of the reason for failure throughout the five years. !his article looks at what
happened at the end of 644-, and also introduces a collection of articles that were written
at the time of each previous ma)or *!@ meetings from the initial 1oha round in 644,
and since.
'ead A*!@ 1oha A1evelopmentB !rade 'ound 9ollapse, 644-B to learn more.
Deregulation or Protectionism'
East updated !hursday, #ugust 4., 644?.
"rotectionism is often referred to as being a barrier to free trade. !he word seems to
con)ure up negative images of isolationism and subsidiNing industries that could
otherwise not compete fairly against others. 8!his can help indicate why some industries
would strongly support protectionism for themselves.: 9omplete deregulation allows
corporations to benefit but at the possible expense of people in that nation or region if
that deregulation means relaxation of environmental rules, health and educational
services including control of natural resources and energy. 8!his hints at the powerful lure
that the LfreeingL of trade and liberaliNation of access to resources from regulation has to
some proponents.: (either seems to answer the notion of fairness, though. @ften those
nations that promote free trade for all, want protectionism for themselves.
'ead A1eregulation or "rotectionismHB to learn more.
(ome "egional Free Trade Agreements
East updated Sunday, (ovember 4D, 6446.
!here have been numerous regional free trade agreements. Some have been controversial,
while others may be beneficial. Examples include the (orth #merican +ree !rade
#greement 8(#+!#:, the +ree !rade #rea of the #mericas 8+!##:, MS attempts at free
trade agreements with #frican nations and so on.
'ead ASome 'egional +ree !rade #greementsB to learn more.
The )ainstream )edia and Free Trade
East updated Sunday, Ouly ,., 6446.
!he mainstream media has been flooded by free trade proponents and heavily backed by
those that will profit from it the most. !his makes public debate more difficult.
'ead A!he Mainstream Media and +ree !radeB to learn more.
Public Protests Around The World
East updated !uesday, (ovember 6?, 644D.
#s more and more people around the world are being negatively affected by the current
corporate&led form of globaliNation, there are an increasing number of protests. *hile
most have heard of the Seattle and *ashington 1.9. demonstrations against the *!@ and
the 0M+5*orld 7ank, respectively, there have been many around the world. Media
portrayal by the corporate&owned mainstream of course, has been biased against the
protesters.
'ead A"ublic "rotests #round !he *orldB to learn more.
WTO Protests in (eattle# *+++
East updated Sunday, +ebruary ,/, 644,.
#t the end of (ovember ,222, Seattle saw ma)or governments meet at a *!@ ministerial
meeting to discuss various trading rules. Seattle also saw free speech cracked down on in
the name of free trade. Enormous public protests ensued. !here were many differences in
the perspectives of developing and industrialiNed nations on the current reality of free
trade and how it affected them. 0t resulted in a *!@ failure to agree on many issues,
without adopting any resolutions. 1eveloping countries were sidelined and one delegate
even physically barred from a meeting.
'ead A*!@ "rotests in Seattle, ,222B to learn more.
General Agreement on Trade in (ervices
East updated !uesday, Ouly 6., 644,.
# similar agreement to the derailed Multilateral #greement on 0nvestment 8M#0:, the
General #greement on !rade in Services 8G#!S: at the *!@ has a potentially wide
ramification for the poor and developing countries.
'ead AGeneral #greement on !rade in ServicesB to learn more.
)ultilateral Agreement on ,nvestment
East updated *ednesday, 1ecember 64, 6444.
*e had a potential nightmare in the form of the Multilateral #greement on 0nvestment
8M#0:. #n almost secret agreement about investment rights and opening up nations for
freer trade. >owever many, many people feared that this would be accompanied by grave
social and environmental conseuences, due to the wording of the M#0 text.
'ead AMultilateral #greement on 0nvestmentB to learn more.