Globalization is a process of integration of economies and communities among countries of the world in abide to make a world wide economy. It comprises of trades in technology, political, economic and culture as a result of improvement in transport, infrastructure and communication. Globalization has both negative and positive impact upon economies of both developing and developed nations. The main purpose of Globalization is to create an avenue for superior competitive power while lowering the costs of operation. The outcome is to benefit from a large quantity of diverse products and consumers for the products. This is achieved by business expansion and resource diversification and opening up of new markets (Nicolas, 2010). This paper is going to analyze on the negative effects globalization in relation to exploitation of underdeveloped Nations by the developed Nations.
Effects of Globalization in developed countries in relation to developing countries
Developed countries are nations with higher scale of economic development. These are characterized by the high levels of gross domestic product, high level of industrialization and human development index. These variables are determined by the international monetary fund, the United Nations and World trade organization. Globalization drives businesses in the developed nations to adjust to various approaches founded on new sensational tendencies that balance the interests of the society at large. This is instigated by risk reduction through hedging as they harmonize international institutions for providing finance. The hedging or diversification of risks by the developed countries is done on evaluation and analysis of country risks of a particular country. For example, United States of America usually have a bias of developing countries which they believe has high Islamic affiliation since they believe that it is connected to terrorism. As a result it is more risky and thereby investors are always advised against investing in such countries. However, if they do invest there are stringent measures that are dictated upon the country concerning the normal running of the country’s affairs. This may be some form of neo-colonialism.
Globalization results into more reforms of affairs at international and national level of developed nations. In fact, there are reforms in production systems, international trade, financial markets incorporation, economic and social connections and global competitiveness. With such cases of reforms, there is normally marginalization of less educated and low skilled employees more of whom originates from the less developed nations. There is increased level of sweatshops in the developing nations where their business are diversified to. Due to lack of the necessary skills the local natives are required to work for long hours at low wages. There is usually high mobility of capital from the marginalized nations as opposed to labor due to the notion that these countries lack experts. Developed nations always carry along their expatriates whenever there is need to invest in the developed nations.
Developing Nations are always on the balance of deficit side. Their trade inflow is normally higher than their trade outflow. Having a look at the three major forces of globalization: product globalization, financial markets, technology and deregulation process, developing Nations are normally indebted to developed nations. Lack of independence rises from the indebtedness as these marginalized Nations, can not make decisions without the directives of developed nations. Developed nations determine where the marginalized nations should invest and how they should carry out their affairs (Arthur, 2005).
The wide public and the non-economists usually have expectations that costs related to globalization should outweigh the gains in the short run. However, this is not the case, as the marginalized countries may not have such kind of benefits compared to developed countries that benefit from high Gross domestic product per capita. Therefore the risks of failure of domestic companies are usually high since they can not compete globally. The labor costs for skilled labor force may be higher endangering the local industries.
There are people who view that there has been increased life saving opportunities around the globe as a result of globalization. A reference is normally made on the increased volume of trade, improved technology and high economic development as visible gains of involvement in a globalized economy (Held & McGraw, 2000). Some argue that there are high living standards as a result of globalization due to technological change (Bata & Bergesen, 2002). This is not the case, as a large population around the world has continues to mount hatred for Globalized Nation like U.S. as a result of inequalities experienced concerning global affairs. For example, Iraq and some other Islamic Nations hate U.S due to its ideologies of fighting terrorism.
Furthermore, inequalities exist in domination of free markets around the round. For instance, U.S which approximately 4% of the world’s population covers most sectors of the liberal markets. Still, 1% of the richest world’s populace has in their hands as much possessions as much as the marginalized 57% (Chua, 2003). There has been negative correlation between the richest countries and poorest Nations as globalization took place. For example United States’ living standards grew by 1.9% from 1980-1998, at the same time countries in the sub-Saharan region of Africa had a 1.2% declining standards of living (Sachs, 2001). The paradox behind this is that, most of the markets for wealthy countries are in poorer and marginalized regions. The rich states benefit by selling cheap, capital intensive consumable products for inflated prices to the poor states. Contrarily, these poor states supply inputs at low prices in form of raw materials and sweatshops such as minerals and agricultural produce. The national income is eventually compromised (Margit et al. 2005). This is in the ideology of liberalized markets which the Nations have to exploit.
Moreover, the post industrial globalization has created a great change to interrelation between the poor and the rich states. According to Adam Smith theory on free markets, information is supposed to be shared freely. U.S has done the opposite by dominating information technology, military combat and they do extract the little information from the poorer countries (Nye & Joseph 2000). This gives them an avenue to take advantage of poor countries’ resources at low pay and making use of weak environmental laws to continue supremacy in worldwide markets. This is propagated by manipulation of globalization institutions such as World Bank and the international Monetary Fund. The Western Countries call for less economically Nations to open their markets to liberalize trade while on the periphery protecting their economic segments (Stieglitz, 2002). A good example is the Timber, Sugar and the Steel industries in U.S. the U.S has continued to press Central America to free trade zone while protecting their sugar industry.
Some people may be of the argument that no one forces the poor Nations to enter into such agreements, yet these poor states do not have a choice but to sign the agreements. They have to secure loans for development, donations to finance their deficit budgets, and make alliances to sell their agricultural produce. The policies set out in the agreements are normally in alignment with the wellbeing of the rich states, hence the poor states end up signing the agreements pre-maturely (Stieglitz, 2002).
Finally, the neo-liberal policies of the international monetary bodies require minimization of government role in the poorer states to cut down on the regulations. This is with aim of attracting foreign investments. Besides, these countries are required to repay off their debts on timely basis therefore they have to increase their exports. The market prices for these exports are usually downsized in the process. The world Trade Organization has barred poor states from adopting some long term strategies adopted by rich nations. For instance, China was prevented from subsidizing its agricultural sector a strategy that has been used by U.S, Japan and South Korea to protect their economic segments (Wade and Wolf, 2002)
Some countries have remained impassive by globalization while others have gained so much. Still others have remained to be inferior (Chua, 2003). Through globalization, indefensible reasonably polarized world has been created overtime. Poor countries have continued to protest without any sustainable solution being found to bring transformation. Inequality has been on the increase forming part of the world order. There has been a large gap between the rich and the poor countries showing the exploitative nature of the developed Nations. It is as a result of this exploitative nature, which richer Nations have continued to expand their territories to greater scales, increasing the dependence of poor Nations on their resources.
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