Globalization is a buzzword that has gained importance all over the world. A significant feature of the global economy is the integration of emerging economies in world markets; expansion of economic activities across state borders and international movement of ideas, information, legal systems, organizations, people, culture, among others.
A World Bank study: Global Economic Prospects: Managing the Next Wave of Globalization succinctly discusses the advantages of globalization. Exports have doubled, as a proportion of world economic output, to over 25 percent, and, based on existing trends, will rise to 34 percent by 2030. The number of people living on less than 1-purchasing power-dollar-a-day, will halve by 2030, as a result of growth in Southeast Asia, whose share of the poor will halve from 60 percent, while Africa's will rise from 30 percent to 55 percent. There has been cross border flows of finance, investment, goods, services and technology diffusion.
Ultimately, globalization not only broadens the gap between the rich and poor, but
also creates distortions in the global economy. The benefits of globalization are often exaggerated. On the contrary, compared to the immediate post-war period, the average rate of growth has steadily slowed during the age of globalization, from 1.3 percent in the 1980s to 1.0 percent in the 1990s. While rich countries grew on average by almost 2 percent per capita
annually from 1980 to 2002, the world's poorest 40 countries had a
combined growth rate of zero. For large swaths of Africa, the income
level today is less than 1-dollar-per-day.
The growing economic interdependence is highly asymmetrical. Industrialized countries are highly interdependent in their relations with one another. The developing countries, on the other hand, are largely independent from one another in terms of economic relations, while being highly dependent on industrialized countries.
Inequality among, and within, nations, has widened. China and India compete globally, yet only a fraction of their citizens prosper. Increasing inequality between rural and urban populations, and between coastal and inland areas in China, could have disastrous consequences in the event of political transition. Forty of the poorest nations, many in Africa, have had zero growth during the past 20 years. Their governments followed advice from wealthy nations and World Bank consultants on issues ranging from privatization to development, but millions of people suffer from poverty.
For many people in Latin America and Africa, globalization is merely a new, more attractive label, for the old imperialism, or worse - for a form of re-colonization. The left-wing reaction sweeping Latin America, from Mexico to Argentina, is a direct consequence of the fault lines opened by policies designed to benefit Wall Street, not the people in the streets of Asmara or Kampala. Social services have been taken over by foreigners.
The rapid growth of global markets has not seen the parallel development of social and economic institutions to ensure their smooth and efficient functioning, labor rights have been less diligently protected than capital and property rights, and the global rules on trade and finance are unfair to the extent that they produce asymmetric effects on rich and poor countries.
The deepening of poverty and inequality has implications for the social and political stability. It is in this context that the plight and hopes of developing countries have to be understood in the Doha Round of trade talks. Having commenced in 2001, the Doha Round was supposed to be about the trade-led and trade-facilitated development of the world's poor countries. After five years of negotiations, the talks collapsed because of unbridgeable differences among the EU, the US, and developing countries led by India, Brazil, and China. The rich countries want access to poor countries' resources, markets, and labor forces at the lowest possible price but refuse to open theirs.
The rich countries' pledges of flexibility failed to translate into concrete proposals during the Doha negotiations. Instead, they effectively protected the interests of agricultural minorities. By contrast, in developing countries, farming accounts for 30 to 60 percent of the Gross Domestic Product and up to 70 percent of the labor force. This is why labor rights protection is at least as critical for developing countries as intellectual property rights protection is for the rich.
Developing countries were promised a new regime that would allow them to sell their goods and trade their way out of poverty through undistorted market openness. This required generous market access by the rich for the products of the poor, and also reduction-cum-elimination of market-distorting producer and export subsidies, with the resulting dumping of the rich world's produce on world markets.
Europe launched its "Everything but Arms" initiative whereby it would open its markets to the world's poorest countries. The initiative foundered on too many non-tariff barriers, for example in the technical rules of origin. The US seemed to offer the so-called EBP - Everything But what they Produce. Under its proposals, developing countries would have been free to export jet engines and super-computers to the US, but not textiles, agricultural products, or processed foods.
Elimination of production and export subsidies by rich nations ,and the opening of markets, while necessary, are not sufficient for developing countries to trade their way out of underdevelopment. They also need to institute market-friendly incentives and regulatory regimes; investment in training, good infrastructure and research.
The failure of the Doha Round is symptomatic of a much bigger malaise, namely the crisis of multilateral governance in security and environmental matters, as well as in trade. In agriculture, as in other sectors, problems-without-passports require solutions-without-borders.
Africans must take a more enlightened view of liberalizing trade, services, and labor intensive manufacturing in which African countries are competitive. Trade is not only a means to prosperity, but also a means of peace-building. We need to devise an enlightened approach in negotiations over intellectual property rights, life saving drugs, and the transfer of technologies toward combatting poverty.
Editor's Comment :The process by which people,
information, trade, investment, democracy, and the market economy are tending
more and more to cross national borders should be embraced by all. This
multiplies options and opportunities.
Who cannot appreciate the fact that transportation
costs have fallen, as more efficient means of communication have come in play?
We no longer need to shop with the big local company; we can turn to a foreign competitor.
We dont have to work for one employer; we can pursue alternative opportunities.
We need not restrict ourselves to local cultural amenities; the worlds culture
is at our disposal. We dont have to be stagnant; we can travel and relocate.
Politicians have to really be practical to elicit interest or support from
people who have a whole world of options to choose from.
As long as we are at liberty to
pick and choose, there is nothing wrong with voluntary cooperation. Every
nation is driven by self interest. There is no way the developed world will
extend an olive branch to developing nations out of love or kindness. This is a business world and everyone wants to reap maximum gain with little effort. Instead
of the developing nations complaining, they should position themselves to tap
from the selfish interest of developed nations. What do you think?
By Dr. Ravinder Rena
Eritrean Institute of Technology
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