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Globalisation and

Economic Development
– Africa and Asia By Dr Anthony Stokes
Senior Lecturer in Economics
Head of the School of Arts and Sciences (NSW and ACT)
Australian Catholic University, Strathfield
While there is a great deal of talk about ‘Globalisation’, it is • increasing the availability and a widening in the distribution
often spoken of as if everyone understands what is meant by of basic life sustaining goods such as food, shelter, health
the term or, alternatively, as some giant mysterious force that and protection.
controls the world. Globalisation can be as simple as having • raising living standards, in addition to higher income, by
an international student attending school with you or surfing providing improved education, employment opportunities,
the internet to do your homework. health care and self-esteem.
Globalisation can be defined as the potential and actual This can be achieved by expanding the range of economic and
movement among nations of: social choices available to individuals and nations, such as the
• Trade right for women to work and to receive an education. While
• Investment achieving higher economic growth is a step in this process, there
• Technology is also a need in most cases for social and economic reforms.
• Finance and The main measure of living standards in the world is the human
development index (HDI). The HDI covers three dimensions of
• Labour
human welfare: income, education and health. Its purpose is not
In looking at the impact of globalisation on economic to give a complete picture of human development but to provide
development in Africa and Asia, this article will be mainly a measure that goes beyond income. The HDI is a barometer
concerned with the impact of trade and investment. for changes in human well-being and for comparing progress in
The process of globalisation is forging deeper interconnections different regions.
between countries. In economic terms the space between Many Australians take their living standards for granted. The
people and countries is shrinking rapidly, as trade, technology quality of life for the majority of Australians is quite high
and investment link all countries in a web of interdependence. compared to other economies. The 2009 Human Development
In human development terms the space between countries is Report (HDR) (based on 2007 data) ranks Australia's quality of
marked by deep and, in some cases, widening inequalities in life as the second highest in the world, after Norway. The main
income and life chances. factors that give Australia such a high ranking are our high life
expectancy of 81 years and the amount of education we receive,
STUDENT ACTIVITIES
(where Australia is ranked first in the world). Our economic
1. What do you understand the term ‘globalisation’ to mean?
growth as measured by Gross Domestic Product per capita is
2. Provide examples of the operation of the process of globalisation
ranked 22nd in the world.
within our region.
3. Discussion activity. Use the article, and your own knowledge, These three criteria are used to measure quality of life as it is
to identify some of the outcomes of globalisation. Refer to believed that they will reflect a country's overall standard of
both positive and negative outcomes, with reference to specific living. Education is seen as a source of productivity and growth
countries where possible. and a high education ranking is considered as an indicator of
4. Find definitions for the following terms: opportunity for the people in a country. In some countries,
•  Standard of living such as Niger, in Africa, less than 30 per cent of children finish
•  Quality of life primary school and the rate for females is below 15 per cent.
•  Purchasing power parity
Life expectancy also reflects your living standards. Countries
•  Gross domestic product per capita
with low living standards tend to have short life expectancies.
For example the life expectancy in Afghanistan and Zambia is
Measures of Economic Development only 44 years. A long life expectancy usually reflects good food,
It is important to understand the nature of economic health and general living standards.
development and how it can be measured. Economic The GDP per capita is measured in terms of purchasing power
development is the physical situation and the state of mind parity (PPP). This tells you how much people living in a country
whereby a society through some combination of social, can buy with their money compared to someone in a different
economic and institutional processes secures the means to country. So a high GDP per capita (PPP) means that the average
obtain a better life. This better life includes: person's ability to buy goods and services is high compared to

~2~

5 of world income. Examine the link between life expectancy and the level of national 0.2 11. account for five per cent of South Africa Swaziland world income. but also education and developing regions. In contrast. 12. a number of countries are in the process of STUDENT ACTIVITIES recovering from reversals.org/ 0. such as in Burundi and in Burundi. bottom 20 countries.8 Years Source: Human Development Report. HDI values began to decline in the mid obvious exception of Africa. Figure 1: Human Development Index of Selected African Countries (1990–2007) So while overall the opening up of global markets and 0. the Pacific and $2900 US in South Asia. other countries have average GDP per capita (PPP) of $5700 US in East Asia and also experienced setbacks – in particular as a result of conflict. Income levels are also lower with an a result of HIV/AIDS.1 Figure 2: H  uman Development Index of Selected Asian 0 0.3 Zambia 0. 6. (HDR 2009) 0. What could halt the decline? Cite an example. In southern Africa the HIV/AIDS epidemic Over the last decade the HDI has been rising across all is affecting not only life expectancy. the development. 2009 http://hdr. Explain the difference between economic growth and economic conflict countries in sub-Saharan Africa (for example. Swaziland and Zambia). 2009 http://hdr.6 STUDENT ACTIVITIES % 0. These countries include the post- 5. Central African Republic. Cote d'Ivoire and Liberia). although the HDI value is still displays the rising Human Development Index levels of three well below earlier levels. 0. a.6 population living on less than $1 a day. account for 1.5 China 10. More than 40 per cent of the world's population constitutes. The drop in HDI values for these Asian countries (Bangladesh. There are signs of recovery Africa.undp.4 India   Banglades nations.4 Botswana the $2 a day poverty threshold. a. The poorest 40 per cent.undp.3 h b. Over the years. in effect.  How do literacy levels impact on the productivity of labour? Countries (1990–2007) c. In countries with the highest life expectancies a child rankings of developing countries over the past decade? born today can expect to live twice as long as a child born in Refer to Figures 1 and 2 in your answer.org/ If we compare the quality of life in Australia with our Asian The Impact of HIV/AIDS neighbours.7 0. Include reference to specific countries in your answer. corresponding to % 0. China and India) that have countries is almost entirely explained by the sharp decline benefited from globalisation. Where does Australia rank under the HDI measure? A child born in the top 20 countries can expect to live to at 8. Explain the correlation between income levels and literacy 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 levels.2 reality or the threat of extreme poverty. 0. internal strife or severe economic changes – but For example Australia's GDP per capita (PPP) was $35. How has the process of globalization impacted on the HDI 49 years. What is the link between productivity levels and wage levels? Source: Human Development Report. in life expectancy. Rwanda in Africa. The poorest 20 per cent of the world's people. the average person in a country with a low GDP per capita. there are many who are missing out. a global underclass. but if she or he happens to be born in one of the our ranking on the basis of GDP per capita. roughly corresponding to the 0. largely as expectancy of 64 years. the countries at the bottom of the world's life expectancy ranking. They are still falling in from 1990 to 2007 of four African countries where development both South Africa and Swaziland and have barely turned the has been inconsistent (Botswana) or gone backwards (South corner in Lesotho and Namibia.8 opportunities through globalization are raising living standards overall.5 per cent 0.000 US these have usually recovered once a period of stability has in 2007 compared to only $298 US in the Congo and $341 US been established and maintained. on average life expectancy is only 9. faced daily with the 0.7 0. Identify the reasons for the reversals in HDI in some African 0. we find that inhabitants of East Asia and the Pacific There are several countries in southern Africa where major have a life expectancy of 72 years and South Asia have a life reversals in human development are still occurring. though at variable rates and with the economic growth. Swaziland or Zambia.9 1990 1995 2000 2005 2007 0. Figure 1 shows the HDI rankings 1990s in this group of countries. Years b.1 income. Explain the apparent disparity between our HDI ranking and least 80 years. Why is the Human Development Index a better indicator of development than income measures such as GDP or GDP per capita? The Impact of Poverty 7. In comparison Figure 2 in Botswana and Zambia. Literacy rates are ~3~ .

Figures 3–5 show that regions such as the developing Asian The Role of Exports in Growth economies that have had trade growth averaging around 12 There is a close relationship between the level of exports and per cent per annum in the last two decades have also had GDP the rate of economic growth in countries throughout the world. This. Some countries and the Pacific and 64 per cent in South Asia. The sub-Saharan region has had similar Figure 3: T  he Level of Economic Growth and Export Growth in Developing Asia Developing Asia GDP and Export Growth 25 20 15 10 Asian export growth % Asian GDP growth 5 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -5 -10 Years Figure 4: The Level of Economic Growth and Export Growth in Africa African GDP and Export Growth 14 12 10 8 6 African GDP Growth %4 African Export Growth 2 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -2 -4 -6 Years Figure 5: The Level of Economic Growth and Export Growth in Sub-Saharan Africa Sub Saharan Africa GDP and Export Growth 15 10 5 Export Growth % GDP Growth 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -5 -10 Years Source: IMF. however makes them very vulnerable completed Year 6 at school. 100 per cent in Australia. to trade shocks. The African region as a The countries and regions with the highest ratios of their whole has had export growth of around five per cent and GDP exports compared to Gross Domestic Products (GDP) also growth of six per cent. compared to are highly dependent on export earnings. growth of over 10 per cent per annum.also much lower in these regions with 93 per cent in East Asia have the highest economic growth rates. 2010 ~4~ . It is important to note that a person Singapore's export earnings are growing at more than double is measured as literate if they are over 15 years old and have their national GDP. For example.

Refer to the pace of decades.au/~gep/economics. There are prices did assist the African economies in the middle of the approximately 77. Chad on cotton and Uganda on Coffee. This has largely lead to improved standards of living growth and the levels of volatility. Likewise Zambia is highly dependent economies from gaining the full benefits of globalization. International to gain increased investment is for these nations to widen Investment relates to investment by transnational corporations their export base away from primarily commodities into (TNCs) such as Microsoft. The long term economic growth and The Role of International Investment development path for many of the African economies International Investment is also an important source of will be one of increased exports and investment. Globalisation and the Global Financial Crisis. These emerging markets and GDP of six per cent. 14. 6 relatively little foreign investment is going into Africa and World Investment Report 2009. Shell Oil and Nike. inject investment. How does a narrow export base impact on a nations' trade performance? References International Monetary Fund (1999-2009). Why do TNCs keep moving their operations from one developing 1 9 (Billions of dollars) economy to another? 97 962 18. available at http://www. rising commodity prices up till 2008 did lead to rising levels The developing economies in Asia are mainly expanding their of Foreign Investment into most of the regions of Africa. Europe LDCs Stokes. sharp decline in commodity prices and the slowdown in global economic growth in the second half of 2008 reversed the trend STUDENT ACTIVITIES as TNCs cancelled or postponed new projects in the wake of the 13. available at http://www.org/ their relatively low wage rates and their growing economies ~5~ . The Global Financial Crisis. A. technology and job opportunities into the economies. Source: UNCTAD. much more dependent on a few commodities and are therefore The African countries have the least investment. The narrow export especially so in Nigeria. 2010 available at http://homepages. As can be seen from Figure The United Nations Conference on Trade and Development (UNCTAD) (2010). They also provide valuable foreign exchange for STUDENT ACTIVITIES the economies. World Economic Outlook.000 foreign first decade of the 21st century for long term development the subsidiaries operating throughout the world.ihug. 2006–2009 Use examples from the article to justify your answer. (2009). 17.unctad.au/~gep/economics. Identify the costs and benefits of foreign investment: Developing countries 2006 a. the manufacturing sectors.com.htm The United Nations Conference on Trade and Development (UNCTAD) In recent years the areas of greatest new investment have been (2009). This has been narrow export base and low export growth. The situation is mixed in Africa with some countries improving and others going backward. 4 and 5 and comment on the similarities and economic growth to many areas of the world in recent differences in the path of GDP growth. East West Asia South-East Memorandum economies and the and South.000 TNCs with over 770. Assessing the Impact of the Current Financial and Economic into the emerging markets in Asia.org/en/docs// diaeia20093_en. and S. While rising commodity known as International Direct Investment (IDI).undp.unctad. for the developing economy 2007 2008 2009:Q1 19. A. Globalisation has brought export growth and increased 15.imf. Caribbean East Asia and CIS ihug. relationship between exports and national income. for the TNC b. South America and the Crisis on Global FDI Flows. 2009. It is also manufacturing and service industries.htm and Oceania Stokes.pdf countries of the former USSR. While on copper exports. The way growth and development in the global economy. generally a more affected by fluctuating commodity prices. Human Development Report.org/en/docs/ the least developed countries in the Sub-Saharan region. for many people especially in developing Asia. One major difference in the exports also have growing export markets so the investment is in the two major regions is that the African economies are further expanding exports and as a result economic growth. Use statistics from the article to explain why developing economies in Asia appear to be more globalised than those in Conclusion Africa. Examine Figures 3.com. These answer lies in the development of manufacturing and service corporations set up their businesses in foreign countries and industries. available at http://www. How does the pattern of global investment help to explain why Figure 6: F  oreign Direct Investment Inflows by Region some regions are growing and developing faster than others. available at http://hdr. wir2009pt1_en. Use the Circular Flow of Income model to illustrate the Global Financial Crisis. What does the term 'narrow export base' mean? 20. Wright (2009).growth rates to the rest of Africa with exports at five per cent providing opportunities for profit. available at http://homepages.org/ Developed Africa Latin America South. Algeria and Libya with most export base and low levels of investment are preventing the African income coming from oil.pdf This movement into the growth regions has occurred due to United Nations Development Program (UNDP) (2010). 16.

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