Another reason why globalization is bad for the third world, which ties into my last point, is that the big international organizations have too much power over the governments in the developing world. As part of the re-structuring of the economy the IMF asks third world governments to lower their fiscal spending to try and create a more free-market economy. This causes major problems as the government has much less power to respond to changes in the economic climate and so often finds it difficult to maintain a stable economy and keep negative influences like corruption low.
As well as this lowering the countries fiscal spending means that people who need government assistance don’t get it and so the number of impoverished people in the country is likely to rise. This is a real problem in the third world, as if people have no disposable income they cannot take advantage of the cheaper goods that globalization should bring and so one of the main positive effects of globalization will not occur.
A third reason why globalization may well be bad for the third world is that it may make third world nations more susceptible to the negative affects of global disasters. When the world markets were not so inter-connected if there was a crash in, for example the US or Chinese economy, it would not have had a major effect on most third world states. This was because they were agriculture based societies and didn’t conduct much trade except with their immediate neighbors, now however increased trade with all regions of the globe has made the countries much less independent.
If today a large economy were to crash then the FDI (foreign direct investment) that many third world nations rely on would dry up and they would struggle to cope as many have tried to decrease their agricultural sectors and are much less self-sufficient. The final problem with globalization that I would like to look at is this idea that open markets and free trade will definitely work for all third world countries, even though the differences between them are massive. There seems to be a general assumption in the west that because globalization benefits the richer countries it will also help the poor.
This has caused many third world nations to be pressurized into opening up their markets when in-fact it may not be the solution. A good example of this is South America where free trade was heavily promoted but failed to produce the positive results expected for many nations. (Miguel Lacabana 2003) Now some South American nations, notably Venezuela have moved towards a more socialist democracy and have stopped embracing American aid and investment, instead moving towards a more self-sufficient economic model.
Although rising oil prices may caused it, this policy has really worked in Venezuela where standards of living have increased dramatically since the liberal president Hugo Chaves came into power in 1998. It is interesting to note that none of the large nations that are now promoting globalization became powerful through free trade and open markets. In-fact the US, Britain and the other European states became the economic powers they are today through policies of high tariffs, low imports and large exports, not the free trade model they are now promoting.
Overall, I personally believe that globalization is inevitable, necessary, and has the potential to be really good for the third world, and increase prosperity globally. The way it is being delivered at the moment however leaves a lot to be desired. Until the powerful organization such as the WTO and the IMF totally reform the methods they use to try and help the third world, globalization is going to be more a hinderence than a blessing.
Economics A2 – Susan Grant and Chris Vidler – Heinemann 2003123 Politics: an introduction, 2nd Edition – Barrie Axford, Gary Browning, Richard Huggins and Ben Rosamond – Routledge – 2002 Journals The effects of IMF programs on Economic Growth – Adam Przeworski and James Raymond Vreeland- Elsevier 2000 Globalization and metropolitan expansion: residential strategies and livelihoods in Caracas and its periphery – Miguel Lacabana – Environment and Urbanization, Vol. 15, No. 1, 65-74 2003 Websites www.wikipedia.com