Globalization
The term "globalization" is a debatable one. Some view globalization as a process that is beneficial -- fundamental to future world economic development -- and also inevitable and irreversible (IMF, 2000). Others regard it with hostility, and sometimes fear, arguing that it increases inequality within and between nations, threatens employment and living standards and disturbs social progress. This paper offers an overview of some aspects of globalization and aims to identify ways in which countries can optimize the gains of this process, while remaining realistic about its potential and its risks.
Globalization offers many opportunities for future worldwide development. However, it is not progressing evenly. Some countries are becoming integrated into the global economy faster than others. Countries that have been successful at integration have reaped the benefits of faster growth and less poverty.
For instance, global-oriented policies resulted in dynamism and greater prosperity for much of East Asia, transforming it from one of the poorest areas of the world to one of the richest (IMF, 2000). As living standards in the region increased, globalization made it possible to make progress on democracy and economic issues, including the environment and work standards.
On the other hand, countries in Latin America and Africa that turned away from globalization thirty years ago, opting instead for inward-oriented policies, now suffer from stagnant economies, increased poverty and high inflation (IMF, 2000). In many cases, especially Africa, adverse external developments worsened the problem. As these areas changed their policies, their incomes rose. These facts show the importance of globalization, proving that encouraging this trend is the best course for promoting worldwide growth, development and poverty reduction.
However, the crises in the emerging markets in the 1990s demonstrate that the opportunities of globalization are not without risks. These risks are rooted in volatile capital movements and the risks of social, economic, and environmental degradation created by poverty. This is not a reason to reverse direction; instead, it is a sign that developing countries should embrace policy changes to build strong economies and a stronger world financial system that will produce more rapid growth and ensure that poverty is reduced.
What is Globalization?
Economic "globalization" is the increasing integration of economies around the world, especially through trade and financial flows (IMF, 2000). This term also describes the movement of people (labor) and knowledge (technology) across international borders.
In general, globalization is a standard process. The term has been commonly used since the 1980s, reflecting technological advances that have made it faster and simpler to complete global transactions -- both trade and financial flows. Today, the term describes an extension beyond national borders of the same market forces that have operated for hundreds of years at all levels of human economic activity, including village markets, urban industries, and financial centers.
Global markets have opened up new doors around the world, promoting efficiency through competition and the division of labor. They allow people and economies to focus on what they do best and provide access to more and larger markets around the world. They open the doors to more capital flows, technology, cheaper imports, and larger export markets. But markets do not necessarily ensure that all shares the benefits of increased efficiency. Countries must be prepared to embrace the global policies that are necessary today, and in the case of the poorest countries, may need the support of stronger nations as they do so.
Does Globalization Increase Poverty and Inequality?
During the 20th century, global average per capita income increased sharply, but with much variation among countries (IMF, 2000). As a result, the income gap between rich and poor countries has been widening for many decades. According to a recent World Economic Outlook study of 42 countries (representing almost 90% of world population) of the entire 20th century, output per capita has increased significantly but the distribution of wealth among countries has become more and more unequal as the years progressed.
Still, it is important to notes that incomes are just part of the equation. Broader measures of welfare that look at social conditions demonstrate that poorer countries have made significant progress. For example, some low-income countries, such as Sri Lanka, have positive social indicators. A recent study revealed that if countries are compared using the United Nation's (UN) Human Development Indicators (HDI), which consider education and life expectancy, the results are different from that suggested by the income data alone.
It is true that the gaps between the richest nations and the poorest have narrowed, but judged by...
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