Does Globalisation Promote Prosperity and Opportunity for All - Coursework Example

Does globalisation promote prosperity and opportunity for all? Name: Lecturer: Course: Date: Does globalisation promote prosperity and opportunity for all? The International Monetary Fund (IMF) (2002) views economic globalization as a historical process that comes about due to technological advancement and human innovation. The IMF further defines it as the movement of labour (or people) and technology (or knowledge) across regional and intercontinental borders. Ismail et al (2011) also describe the term “economic globalization” as the increased integration of national economies globally, chiefly through cross-country flow of finances, labour, resources, and trading. Indeed, globalization is characterised by several features: it implies free access to international market, marketing of standardized products globally, access to raw materials or labour from other parts of the world, and free mobility of labour (Joshi 2010). The term "globalization" is viewed as a beneficial process that is central to speedy economic development across the globe. To some scholars however, globalisation is viewed with suspicion and hostility due to its potential to increase inequality in and among nations, increases unemployment, as well as lowering the living standards and social progress (Ibrahim 2013; Manteu 2008). This rationalises the need to examine whether globalisation leads to economic opportunities and prosperities for all. It is argued that globalisation promotes prosperity and opportunity for all. Economic growth and inequality Globalisation brings about unprecedented economic growth and reduced inequality. Globalisation has intensified trade and financial services across the globe. Still, a major striking feature of the trend is the increased integration of financial markets and cross-border trading among people from different countries due to the invention of e-communication (IMF 2002). Some scholars have also observed that globalisation led to unprecedented economic growth, where the global per capita gross domestic growth increased nearly by five-time. While the economic growth has generally been erratic, the biggest expansion was witnessed in the later part of the 20th century because of the intensified globalisation (See Figure 1). At the same time, there was extraordinary average income growth, although it also becomes clear that the progress was unevenly dispersed (IMF 2002). Figure 1: Rise in income levels due to globalization (IMF 2002) The gaps between rich and poor countries, and rich and poor people within countries, have grown. For instance, as indicated in Figure 2, some Asian countries like China that increased their participation in international trade and witnessed stead growth of per capita incomes since 1970 that matched that of the industrial countries in Europe (Wen, D 2014). Figure 2: developing newly industrialised nation's per capita GDP (IMF 2002) According to IMF (2002), the developing economies that witnessed increased steady economic growth had increased their shares of the international trade from nearly 19% in 1971 to more than 29% in 1999. Indeed, the effects of globalization on the Chinese economy are far-reaching. In a record two decades 1978, the Chinese international trade expanded 16-folf, while its ranking in the world shifted from 32 to seven. The trade dependence rate also increased to 36% from 10%, as it became the developing country with the largest number of foreign direct investment (FDIs). Ultimately, the country’s GDP witnessed an average annual growth rate of 9.7 percent during the two decades, where 2.7 percent was credited to FDI (IMF 2002). In all, globalization has differing effects on different economies dependent on their levels of development. The globalization processes may tend to restructure the economic progresses among economies in a different way by breaking the commercial, and communication barriers. Overall, globalisation brings about unprecedented economic growth and reduced inequality, as the developing economies that increase their shares of the international trade witness increased steady economic growth. Poverty and income inequality Globalization has reduced poverty and income inequality. A survey of the poverty trends in the 20th century reveal that the global average per capita income increased steadily, although with significant variation among several economies. A recent World Economic Outlook study of 42 economies, which represent some 90% of the global population, concluded that the output per capita rose considerably. Again, the poorer nations made significant economic progress. A developing nation like Sri Lanka showed impressive social indicators. The United Nation’s Human Development Indicators (HDI), show that incomer gaps among countries narrowed. In fact, IMF (2002) takes this argument to argue that due to globalisation, the current poor nations are ahead of some of the developed nations that prevailed during the 1870. Again, life expectancy has increased parallel to the improvement of the quality of life for many countries. Still, the gap between the poor and rich nations increased. Nearly 25% of the global population witnessed increased per capita GDP by six-fold during the 20th century, compared to the poorest 25% who witnessed experienced growth in per capita GDP by only three times (See Figure 1). While globalization provides far-reaching economic opportunities for global development, it does not progress evenly (Weede 2004). While some nations become incorporated into the global economy more rapidly and beneficially, others witness slowed economic growth. For instance, during the 1880s when a majority of African and Latin American countries practised inward-oriented policies, they experiences stagnation of their economies. At the same time, poverty intensified. When the regions transformed their policies, they experienced a rise in the incomes. However, the financial crises and rise in incomes inequality within these emerging markets such as in Latin America during the 1990s due to neoliberal policies have showed that globalization does come with risks that arise from volatile capital movements in addition to the threats of economic, social, and environmental degradation triggered by poverty (Kus, B 2014; Larrea, C 2006). To a greater extent however, globalisation is more beneficial as it reduces poverty and improves individuals’ income per capita. Overall, globalization reduces poverty and income inequality, leading to prosperity and economic opportunity for different economies. Demand for labour and growth of national productivity Globalisation has increased demand for quality labour and growth of national productivity. Globalisation also increases competitiveness among nations to maximise their productive capacity. While the industrial economies have gained greater levels of maturity, they have also become more service-oriented in order to address the shifting demands of their increasingly heterogeneous population. Again, it has contributed to a change towards greatly skilled labour. According to Ismail et al (2011), globalisation has made production to be less costly as it brings the advantages of capital flows, technological innovations, as well as lower import prices. For this reason, countries that practices open-door policy like China and Malaysia experienced higher economic growth, employment rates, and better standards of living than those in the closed economies (Ismail et al 2011). From this, it is clear that dissimilar political systems that different economies apply mean that they will have different economic policies, depending on the level of control they wish to exert on trading with other countries. Hence, the policies may either be open-door policy or closed-door policy. According to Mallick (2013), globalisation is linked to labour productivity through trade liberalisation and FDI. In particular, FDI is linked to the inflow of new technology and capital to the host countries. Although the developed nations have been associated with the application of advanced technology in the production compared to the developing nations, the spill-over effects of technology due to FDI makes sure that the developing nations can access better technology to improve their productive capacity (Dappa & Thom-otuya 2010). For instance, Malaysia’s manufacturing sector has been impelled to reinforce its capacity to compete in the world market. The growth of the sector is has been encouraged by the country’s participation in the FDI and international trade. Indeed, statistics indicate that the contribution of the manufacturing sector to the GDP rose from 18.3% in 1970 to more than 31.9% in the 2000 due to globalisation. The sector further created more than 27.7% job opportunities in 2000 to more than 28.7% in 2005 (Mallick 2015). Similar trends have been witnessed in the BRICS (Brazil, Russia, India, China, and South Africa) nations. Due to the effects of FDI, labour productivity in the BRICS countries rose by 5% between 1991 and 2012 (Mallick 2015). Overall, globalisation increased demand for quality labour and growth of national productivity, which leads to prosperity and economic opportunity for different economies. Conclusion Globalisation promotes prosperity and economic opportunity for all. It brings about unprecedented economic growth and reduced inequality. Globalisation has also intensified trade and financial services across the globe. Still, a major striking feature of the trend is the increased integration of financial markets and cross-border trading among people from different countries due to the invention of e-communication. Again, globalisation has increased demand for quality labour and growth of national productivity. Globalisation also increases competitiveness among nations to maximise their productive capacity. Globalisation is also linked to labour productivity through trade liberalisation and FDI. In particular, FDI is linked to the inflow of new technology and capital to the host countries. Globalization also reduces poverty and income inequality. As established, global average per capita income in the 20th century increased steadily, although with significant variation among several economies. Again, life expectancy has increased parallel to the improvement of the quality of life for many countries. References Dappa, T & Thom-otuya, B 2010, "The Effects of Globalization on Developing Economies: The Nigerian Experience." Sophia: An African Journal of Philosophy vol 12 no 2,pp1 Ibrahim, A 2013, "The Impact of Globalization on Africa." International Journal of Humanities and Social Science vol 3 no 15, pp.85-93 IMF 2002, Globalization: Threat or Opportunity? viewed 14 Sept 2015, Ismail, R, Rose, A & Sulaiman, N 2011, "Globalisation and Labour Productivity in the Malaysian Manufacturing Sector," Review of Economics & Finance, pp76-86 Joshi, M 2010, What are the features of globalization? viewed 14 Spet 2015, Kus, B 2014, "The informal road to markets: Neoliberal reforms, private entrepreneurship and the informal economy in Turkey" International Journal of Social Economics vol 4 no 4, pp.278-293 Larrea, C 2006, "Neoliberal Policies and Social Development in Latin America," Paper Presented at the 2006 Congress of Social Sciences and Humanities, CERLAC, York University, June 2, 2006 Mallick, J 2013, "Globalisation and Labor Productivity in OECD Regions," Paper prepared for “Regional Development Conference” May 2013, University of Pardubice, Pardubice, Czech Republic. Mallick, J 2015, "Globalisation, Structural Change and Labour Productivity Growth in BRICS Economy," FIW Working Paper N° 141 February 2015 Manteu, C 2008, "Economic Effects of Globalisation: Lessons from Trade Models." Economic Bulletin Banco de Portugal, pp. 73-87 Weede, E 2004, "The Diffusion of Prosperity and Peace by Globalization," The Independent Review, Fall 2004 Wen, D 2014, China Copes with Globalization: a mixed review, nternational Forum on Globalization, San Francisco, Read More