Globalization is an inevitable process that is transforming the world into a uniform global system. Globalization issues have become rather pressing in the 1990s. Globalization, in terms of the world economy, implies transforming multiple world economies into the uniform zone, which allows for the information, goods, services, and capital to be distributed freely. Globalization is a broad notion that goes far beyond merely economic frames and influences virtually all of the social spheres such as politics, ideology, and culture.
There is no doubt that globalization is playing a dominant role in the world economy by providing a fresh impetus to the new system of international, economic, and political relations. The views and attitudes towards globalization are rather ambivalent, some see it as a serious threat to an economic system while others view it as a vehicle that is driving forward the economic progress. Undoubtedly, globalization consequences may be both positive and negative, although one thing is clear, there seems to be no stopping it. Bearing that in mind, the essay will focus on the opportunities presented by globalization, and benefits for the economy, as well as the threats that it might pose to some of the developing countries.
Globalization has been studied by many economists, Joseph Stiglitz, winner of the Nobel Prize, in his book ‘Making Globalization Work’ took a critical view of globalization and its effect on the emerging economies. Contrary to the popular belief that globalization is bound to lead to a higher quality of life, enhanced access to foreign markets, and open borders, Stiglitz argues that globalization is failing in its attempt to bring complacency and prosperity to the people living in developing countries. One of the so-called advantages of globalization is free trade among nations and open borders, Stiglitz (2006) takes a dim view of free trade agreements and maintains that “The United States and Europe have perfected the art of arguing for free trade while simultaneously working for trade agreements that protect themselves against the imports from developing countries” (p.97). With this view, Stiglitz indicates that the free trade agreements between the countries are not mutually-beneficial, and trade regulations are unfair to the developing countries. In fact, the disproportional distribution of profit from the free trade is alarming, with the Uruguay Round trade agreement, 75% of gains went to the developed countries, around $350 annually (Stiglitz, 2006).
To add to this argument, Stiglitz says that the developing world has 85% of the world’s population, despite that, it received only 30% of the free trade benefits, more so, these benefits were accumulated by middle-income countries like Brazil (Stiglitz, 2006). The statistics voiced by Stiglitz does not arouse enthusiasm about free trade among the developing countries, and to rectify the current state of things, Stiglitz proposes that current trade arrangements be altered in such a way so that developing countries would be treated differently and obtain wider preferences. Economic globalization, according to Stiglitz violates the fundamental principles put forward by the World Trade Organization (WTO), and the General Agreement on Tariffs and Trade (GATT), which are supposed to promote nondiscrimination against the members of the GATT and WTO.
Stiglitz’s views on globalization are aligned with the views of Ha-Joon Chang who shared his attitude to globalization in his book ‘Kicking Away the Ladder: Development Strategy in Historical Perspective’. The central idea that Chang puts forward in the book is that the developed countries that encourage other countries to pursue liberal trade and tariff preferences, paradoxically did not follow these same principles when they were newly emerging economies in the 19th century (Chang, 2003). Conversely, the developed countries used to enforce high tariffs introduced sectoral industrial regulations and delayed enacting the democratic reforms. Based on Chang’s views, the developed countries, especially the UK and the USA, did not practice what they are preaching today (Chang, 2003).
To back his words, Chang presents the reader with insight into statistics, according to which the USA, an ardent advocate of economic globalization, had one of the highest average tariff rates in the world (Chang, 2003). Chang goes on to say that the US industries, until 1945, received the utmost protection as compared to other emerging industries of those times. To compare the tariffs in the UK and the USA with the ones introduced in Germany and Japan, one would see that the tariffs in Germany and Japan were lower, below 5%, as compared to an exorbitant 48% in the US (Chang, 2003).
Although Chang’s book was published in 2003, and Stiglitz was published in 2006, the issues of globalization are still topical to this day. Since ten years passed since the books were published, it is now even more interesting to analyze the ideas and the central concepts voiced in them. There is no doubt that as of 2016, the globalization is no longer a newly-emerged theme, the open borders and free trade agreements are already in place for many countries. The question remains, does globalization present equal opportunities to all the states involved in it?
Are the interests of third-world states taken into account in terms of globalization prospects? In his book, Chang mentions Friedrich List, the 19th Century German economist who came up with an interesting ladder analogy implying that the developed economies used a ladder to climb up the economic success, but once they were up, they kicked away the ladder since they no longer needed it (Chang, 2003). This metaphor is used to present an idea that the US and UK’s economies are so strong, that they may now use fewer protection measures for their industries. The developing countries are encouraged by the developed ones to climb up the economic ladder and enjoy the economic complacency, however, the ladder is not given to them. This metaphor presents the reader with an intriguing contradiction, implying that it is impossible to reap the benefits of globalization and free trade without protecting its internal market and internal core industries first.
To put the metaphor into simple words, Chang (2003) says that “Britain’s technological lead that enabled this shift to a free trade regime had been achieved behind high and long-lasting tariff barriers” (p. 24). Nowadays, developing countries are forced to lift the barriers and embrace market globalization and free trade, however, their infant industries haven’t reached a stage where they could equally compete with the giant industries of the developed countries. This situation forces a vision that globalization is two-sided: developed countries enjoy the absence of tariffs and barriers, and therefore, have ample market opportunities to sell their goods while the industries of the developing countries desperately fail the competition with long-standing foreign industries. As a result, the developed countries report higher economic growth year after year, while developing countries struggle with poverty and failing economies.
My view is aligned with the authors of the two books discussed in this essay. Globalization put an end to the nation-state and nation-trade turning everything international. With all that, globalization has two faces, the beautiful for the developed countries, and the ugly for the developing countries. The double-sided effect of globalization is backed by Stiglitz, who shares interesting statistics according to which the poverty has increased over the last two decades, and as of 2006, 6.5 billion people lived in poverty according to the World Bank. To further prove the statement that globalization and free trade agreements are not giving a desired effect to the poor countries is the World Bank press release (2015) which says that “For the last several decades, three regions, East Asia and Pacific, South Asia, and Sub-Saharan Africa, have accounted for some 95 percent of global poverty” (para. 9). Globalization advocates saying that enhanced trade opportunities and open borders present countries with unseen-before benefits will probably fail to answer the question of why East Asia and Sub-Saharan Africa did not reap the benefits of globalization and remain poor to this day. The developing economies of South America saw only modest or no growth with their industries failing the increased competition.
The views of the eminent economists expressed in their books clearly indicate that it is rather misleading to state that globalization presents benefits and opportunities or, on the contrary, poses a threat. As the authors maintain, globalization is a two-edged sword with benefits for some countries and threats for others. Since globalization has already become an integral part of our life and has penetrated social, cultural, economic, political, and multiple other spheres, the main question now, resonates with Stiglitz’s book title ‘making globalization work’ meaning that people need to find ways to make globalization work equally and beneficially for all, and not for the chosen few.
Chang, H. (2003). Kicking away the ladder: infant industry promotion in historical Perspective. Oxford Development Studies, 31(1), 21-32.
Stiglitz, J. (2006). Making Globalization Work. New York, New York: W. W. Norton & Company
World Bank Forecasts Global Poverty to Fall Below 10% for First Time; Major Hurdles Remain in Goal to End Poverty by 2030. (2015). Web.