Is Globalisation Producing More Losers Than Winners - Case Study Example

Student’s Name] [Instructor’s Name] [Class] Is Globalisation Producing More Losers Than Winners? Introduction Globalisation is a word which has many connotations and definitions depending on the individual context it is used in. In fact, depending on the form of government, the type of economy and even the economic situation of the government, globalisation can be seen as a formula for winning for an agenda for losing. To examine the situation concerning globalisation producing more winners or losers we have to understand what globalisation entails and what nations hope to gain from it to become winners. At the same time, we also have to examine policies which can lead to the poor application of globalisation that create losers. In essence, it can be shown that globalisation itself does very little to create losers or winners since it is the complete set of policies used by a country which can lead it to being a success or lead it towards failure. In this manner, the effect of the globalisation process can be lenient or harsh, the result of engaging in mutual trade can be cooperative or confrontational but whatever path globalisation takes, the policies of a country do more than any other factor which affects globalisation. Winners and Losers Admittedly, it can be said that in certain situation the process of globalisation may be forced upon some countries. For example, the case of Mexico is a perfect example of how the country was cajoled into accepting the NAFTA which only led to the decline of the agricultural sector of the economy and caused pain and suffering for millions of Mexican farmers (Clark, 1999). The Mexican government certainly wanted to be part of the NAFTA due to the advantages it would get in terms of foreign investment but it did have to pay a heavy price in human costs. Considering the process of globalisation in historical terms, during the age of colonisation, the British Empire ruled an area over which the sun never set. The government policy of expansion and increased utilisation of resources in colonies such as America and India certainly helped the economic and social development at home. The inputs obtained from trade, farming and export of materials to the American continent became the globalisation force for the empire which took it to new heights. Indeed, the industrial revolution itself owes a lot to the British policies of globalisation supporting British interests (Hamilton, 1929). Colonisation/Globalisation Hamilton (1929) also gives credit to the scientific development which was taking shape at the time, but notes that without the governmental policy to support colonisation efforts; the scientific discoveries might have gone unnoticed. In fact, the ideals of capitalism helped the globalised growth of the British Empire much as the ideals of capitalism help companies grow today. In today’s world, instead of countries becoming richer through the use of global industry, the gains are often made by companies and businesses who locate their operations around the world to obtain the best resources at the lowest cost wherever they can seem to find them (Braithwaite & Drahos, 2000). Rapp (1975) further supports the argument of globalisation creating winners through the use of government policies when he discusses how the discovery and conquest of the American continent was the most important reason for the rise of Europe as the centre of civilisation. Previously, Europe lagged the Middle East and even Asia since their conquest and colonial domination had placed them in global control of resources. However, with the discovery and control of the Americas, Europe was able to have access to resources which were previously unknown to the world. As discussed by Rapp (1975), the policies, plans and laws established by the British in support of globalisation led them to greater economic growth and allowed them a high market penetration with which the country outperformed its other international rivals. With effective policies, Britain created an agenda of globalisation which made it the winner in the early part of the 19th century to the point that one island nation controlled global trade and commerce. It had become a winner with globalisation. Of course it also meant that many others were losers but not because of globalisation in and of itself. They became losers simply because their policies were ineffective and they did not fully exploit the opportunities given to them. Other European nations at the time (such as Portugal and Spain) also gained considerably from following a policy set which supported globalisation but they did not make gains as effective as the British did (O’Brien, 1982). However, this does not mean that globalisation of business through colonisation can be considered justifiable in any way since while there were colonists, there were also those who were colonised and they certainly objected to it. While the business agenda of the colonists was clear in the sense that they wanted to gain whatever they could, the people who were colonised were perhaps the greatest losers of the battle. Historians as well as those nations that had to suffer through the age of colonisation may very well say that the policies of globalisation at the time were inhuman and cruel since they took away freedom from millions. However, the policies certainly created winners for the nations who used them and the people who invested their time and money into the process of colonisation. Globalisation Today In a similar manner, globalisation today continues to have supporting individuals who think that it helps the masses and improves the human condition (Clark, 1999). On the other hand, there are those who consider the agenda of globalisation to be nothing more than neo-colonialism. After the Second World War, the capitalist countries of the world which form a large part of the western civilisation have faced significant economic issues such as rising inflation, currency value fluctuations and problems with debt servicing. However, while industrialised countries may have ways to handle these problems that come as after effects of globalisation, many of the poorest nations of the world need outside support before they can gain any benefits from being a part of the global economic system (Stiglitz, 2002). While some economists suggest that international groups such as the UN, The World Bank and the IMF serve the cause of global development by bringing social benefits and helping economic growth for developing nations (Akbar, 2005), others such as Stliglitz (2002) suggest that the situation is quite the opposite. In some cases, a country’s leadership may even accuse the policy recommendations coming from the World Bank or the IMF to be the direct cause of their negative economic conditions (Clark, 1999). The world has changed considerably with the rise of violence and the altered state of affairs between underprivileged nations and wealthy countries. Some extremists may cite the policies of their governments to come from orders given by the IMF or the World Bank which lead to them retaliating against the West (Stiglitz, 2002). Strangely enough, these financial bodies work with the belief of helping those countries who are in need and the suggested policies are thought to give countries the way with which they can move along the course of enhanced human development. A Consensus? Thus when it comes to the idea of globalisation, there is a significant divergence in viewpoints which becomes nearly impossible to reconcile since there is some truth in both sides of the argument (Clark, 1999). The policies recommended by international bodies may be difficult to establish or even appreciate in the short term since the policies recommend making room for the forces of globalisation. However, the long term benefits of becoming a globalised country remain attractive. In such situations, sustainable development through globalisation becomes difficult because the policies may have a negative social influence that could lead to a negative social development path that may be quite difficult to control for a weak national order (Rodrik, 2001). Understanding this concept becomes easy when we know that the policies suggested in aid of globalisation are termed as the Washington Consensus. This is a set of policies recommended by institutes such as the World Bank and the IMF as positive steps for developing countries. They are given to developing nations in order to enhance their economic as well as social development rates (Williamson, 2000). The supporters of these policies call such recommendations essential for the process of globalisation economic independence while those who oppose the policies call them an tool of neo-liberalism and a tool for the creation of American global hegemony (Rodrik, 2001). Creating the Right Policies In terms of policy guidance and recommendations which are meant to enhance sustained development, aid globalisation and end human suffering, economists such as Williamson (2000) say that many analysts misunderstand the need to establish the policies of the World Bank and IMF. He further says that people around the world think that the policies are more or less forced upon various weaker countries by international organisations since international organisations want globalisation to take place regardless of the human cost. To better understand the policies which support the process of globalisation, Robinson (2005) discusses the viable options that include the creation of a wider tax base, creating a market based interest rate, liberalised trade rules, improved prospects for FDI, privatisation of nationalised industries, deregulation of controlled economic structures, creating correct currency exchange rates and improving governance. Along with these policies, it is also recommended that countries on the path to globalisation should look at reducing official corruption, entering international trade agreements, and redirect government spending towards social and economic development. Further investments from the government are also recommended for projects such as healthcare, education, rural development and human development. Good Policies before Globalisation These policies need to be in place and under implementation before globalisation can create a winner out of a country. If the implementation of these policies is not there, globalisation might actually create losers for the country (Robinson, 2005). Even the IMF (2006) acknowledges that these policies have been used in a number of countries for several years with a mixed success rate. As a matter of fact, in certain situations, the policies have disastrous while other nations have managed to improve their development trajectories by careful application of the methods prescribed (Craig, 2000). The mixed results of the polices have led individuals such as Held (2005) to say that the policies being followed in developing countries are little more than policies that advocate free trade, liberal markets, property rights, and deregulation as the given by rich countries to poor ones without any thought to the needs of the poor country. The policies therefore, are for the benefit of the rich nation which gains out of the idea of globalisation while the poor country loses out. This issue has been recognised by the IMF (2006) who says that any country which seeks help from the body must first meet certain criteria and have a reasonable developmental score so that only the right policies for globalisation can be recommended. The right policy that results in the positive effects of globalisation therefore can change from country to country. Local Policy, Global Impact It seems that is being done to create more winners in the process of globalisation. Instead of focusing on a group of policies which are supposed to be equally good for all developing nations, the present idea is to look at individual situations and then to create solutions which help development through globalisation. In essence, the situation of the country becomes important for giving the right kind of policy recommendations. Moreover, a country can be given other additional recommendations which could be important for a developing nation with regard to good governance and human development. Rodrik (2001) outlines these policies which go hand in hand with globalisation to include social and moral constraints such as: Individual and corporate accountability Creating quality standards for industries Government bodies showing social responsibility Policies to reduce corruption Creating a sense of responsibility for the citizens Banking system should be independent and accountable Cooperation agreements nations in similar situations Social welfare programs focused on reducing poverty When it comes to globalisation, these policies coupled with a high level of investment could indeed make a winner out of almost every country. However, the application of the policies and the implementation of the dictates of globalisation still remain difficult questions for many nations. Undoubtedly, these policies have shown a positive impact in some nations in Africa and Asia but a lot more remains to be done in many other parts of the world (IMF, 2006). The policy recommendations to low income countries for going on a positive development trajectory as suggested by the IMF has been set by Rodrigo de Rato, in his position as the Managing Director of the IMF. Mr. Rato has set the support of the globalisation process and social improvements for poor nations as a priority for the IMF. It is believed that such an approach would enable these economies to come out of the debt and the poverty cycles on their own rather than to keep them looking for help from other nations (IMF, 2006). Further, development plans are being made to forgive the debts owned by many poor nations who find debt servicing a heavy burden. The official recommendations from the IMF restrict government policies which demand loans until economic situations are improved and development conditions are met. Such procedures give the economy a chance to grow and develop before it is burdened with additional loans. The general focus of the IMF guidelines appears to be on creating positive and sustainable relationships between various countries to establish bonds of cooperation between trade partners rather than a master/slave relation. From an unbiased viewpoint, the policy recommendations connect with debt relief and the IMF has already granted a total write off in terms of debt relief to nearly twenty poorest nations of the world. The majority of these nations are located in sub-Saharan Africa where poverty levels are often quite extreme (IMF, 2006). Mismanagement of Funds The impact of globalisation creating losers becomes clear when we examine the state of the CAR states. The Central Asian Republics (CARs) are a group of nations who did not accept the guidance of the international organisations in terms of their development goals and their development trajectory was seriously due to that. When they came into being after gaining independence from the former Soviet Union, these nations were debt free but within a few years, they were placed amongst the most indebted nations of the world (IMF, 2006). Clearly, the decisions of the governments and the policies made by those who control these countries make them losers or winners rather than the simple process of globalisation. Consider their situation along with the position of many nations in Africa, Akbar (2005) strongly suggests that financial management and handling huge sums of money can be a big issue for individuals who have had no previous experience in managing such sums. Therefore, international organisations should step in to help governments create positive policies and aid should be given to support positive causes and human development programmes rather than the agenda of globalisation. Further, the UN (2008) recommends that aid should be used primarily for programmes which work for hunger elimination, disease control, education and the reduction of poverty rather than business development. At the same time, while these programmes can certainly be established by the governments of poor nations, without the proper expertise, human capital and most importantly the required cash, such development trajectories would be difficult if not impossible. Who Globalises Wins It is understandable that global trade and international business related connections between countries are a part of the larger process of globalisation which has been changing government policies for years (Clark, 1999). In terms of international relations and even in terms of international business between nations, it can be been said that no nation has permanent allies, just permanent interests. The trade policies followed by many nations certainly show that maxim to be true. The relations between developing nations and their industrialised counterparts are no exception since developed nations like monopolies create automatic barriers for certain markets. Many products from developing nations may be seen as unacceptable due to inferior quality, low tech industrial methods and other constraints which could cause the policies supporting globalisation coming from a developing nation to fail (Braithwaite & Drahos, 2000). Developing nations may want the benefits of globalisation but they may lack the networks, the technical expertise, the production bases and even the highly skilled labour which is required to produce the goods wanted by the rest of the world (Bardhan, 2006). Industrialised nations like America or the majority of the nations comprising the European Union have gotten used to a certain level of quality production for many goods that developing nations may not be able to recreate (Wannacott, 1996). We know that developing nations have a comparatively low standard of living, an underdeveloped industrial base and they score lower on the scale of the human development. In comparison, industrialised countries have modern industrial bases with the supporting infrastructure and they are less reliant on basic economic activities such as agriculture or mining. The economy of a developed nation is in fact based on continuous, self generated growth coming from the services or the industrial sectors of the economy which only feeds the engine of globalisation (Sell, 2000). This situation is not easy to change overnight and may create losers out of developing countries when they seek to have trade relationships with highly developed nations. For example, a Barbie doll is made with various components of the doll coming from different countries and it can be used as a good example of how globalisation creates winners and losers. Discussing this topic, Feenstra (1998) reports that the raw material is produced in Taiwan or Japan, the assembly process takes place in Indonesia or Malaysia and China supplies all the dresses for the doll. The total economic input for these nations is less than $2 per doll even though the labour intensive work is done there. At the same time, the toy itself sells for about $10 in America or Europe. The winner in this case is the company which sells the toy since the profit margins are huge. The customer loses out on savings which could be passed on to him/her, the producers lose out on profits that could be shared while countries lose out in social and economic terms. Of course, the consumption of goods such as toys and dolls produced by Mattel is much higher in the developed world therefore most of the marketing, development and design work is done in industrialised nations. If the developing nations are able to create their own market for such branded ‘luxury’ toys, it would be possible for these goods to be consumed in high quantities in those countries as well. Globalisation is also connected to the free trade agreements that exist between countries by which two or more nations can agree to reduce or remove any barriers to the import/export of goods (Braithwaite & Drahos, 2000). This can be a mixed blessing for the countries involved although the developed nation often has the advantage. The simple reason for this is that the industrialised nation can offer more to the people of the developing nation than the developing nation can offer to the other country. Though the market access is not one way, the flow of goods from the developed nation to the other might be higher (Clark, 1999). This brings back the policy discussion with regard to globalisation as international trade barriers can also function as constraints for developing nations. Certain countries may have restrictions on imports for the protection of their infant industries. The goal of these barriers is to ensure that no one is treated unfairly with globalisation and such policies have often been successful in meeting that goal. The UAE is a case in point since it actively seeks changes in international trade policies which are helpful to her own cause but has not seen it feasible to change her own local policies for foreign investment (Al-Qasimi, 2006). International trade policies and local trade agreements between countries can often be helpful dealing with such situations. India and Pakistan give us a good example where trade between the nations has led to increased confidence building which gives the people of both the nations a hope for a lasting peace between the two neighbours who have fought several wars with each other in the past years. This is certainly a positive impact of globalisation as both countries can be made to see the economic and developmental benefits of globalisation as compared to the disadvantages of war and conflict. The political conditions of these and other developing nations often make some investors hesitant in coming to such nations and investing in politically unstable regions. However, once political and economic stability is seen as a viable trend, the countries can expect foreign and local investors to bring their money and engage in the process of globalisation. Again, such situations can only be created if the national policies of the governments of the countries interested in international trade are willing to accept globalisation related policies that help international investment. Conclusion While matters of globalisation, international trade, countrywide industrial output, levels of development and the peaceful development of nations are all dependent upon the policies being followed by the government of the nation, it is clear to see that government policies and winning through globalisation are linked far more closely than any other influences. The primary conclusion which can be made is that governments and nations who seek to develop further and become winners with globalisation only have their policies to work with and only their policies will create winners or losers. Therefore, it is not globalisation which produces winners or losers but governmental policy that can allow globalisation to have a negative or positive impact. Word Count: 4,008 Works Cited Akbar, N. 2005, ‘Scoring the Millennium Goals: Economic Growth Versus the Washington Consensus’, Journal of International Affairs, vol. 58, no. 2, p233-244. 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