Facts
Source: The World Bank, 2004, http://www.worldbank.org/
United Nations Development Programme, 2004 http://www.undp.org/
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Background
What is globalisation?
There are
many different definitions of globalisation, but most acknowledge the greater
movement of people, goods, capital and ideas due to increased economic
integration which in turn is propelled by increased trade and investment. It is
like moving towards living in a borderless world.
There has
always been a sharing of goods, services, knowledge and cultures between people
and countries, but in recent years improved technologies and a reduction of
barriers means the speed of exchange is much faster. Globalisation provides
opportunities and challenges. Bigger markets can mean bigger profits which
leads to greater wealth for investing in development and reducing poverty in
many countries. Weak domestic policies, institutions and infrastructure and
trade barriers can restrict a country's ability to take advantages of the
changes. Each country makes decisions and policies that position them to
maximise the benefits and minimise the challenges presented by globalisation.
The
issues and perceived effects of globalisation excite strong feelings, tempting
people to regard it in terms of black and white, when in fact globalisation is
an extremely complex web of many things. The following table presents ten
opposing points of view often expressed about globalisation.
Benefits of globalisation
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Problems of globalisation
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1.
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Economies of countries that engage well with
the international economy have consistently grown
much faster than those countries that try to protect themselves. Well
managed open economies have grown at rates that are on average 2 ½ percentage
points higher than the rate of growth in economies closed to the forces of
globalisation.
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There
are social and economic costs to
globalisation. Trade liberalisation rewards competitive industries and
penalises uncompetitive ones, and it requires participating countries to
undertake economic restructuring and reform. While this will bring benefits
in the long term, there are dislocation costs to grapple with in the
immediate term, and the social costs for those affected are high.
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2.
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Countries
which have had faster economic growth have then been able to improve living standards and reduce poverty.
India has cut its poverty rate in half in the past two decades. China has
reduced the number of rural poor from 250 million in 1978 to 34 million in
1999. Cheaper imports also make a wider range of products accessible to more
people and, through competition, can help promote efficiency and
productivity.
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Some
countries have been unable to take advantage of globalisation and their standards of living are dropping further
behind the richest countries. The gap in incomes between the 20% of the
richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1
in 1995.
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3.
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Improved
wealth through the economic gains of globlisation has led to improved access
to health care and clean water which has increased
life expectancy. More than 85 percent of the world's population can
expect to live for at least sixty years (that's twice as long as the average
life expectancy 100 years ago!)
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Increased
trade and travel have facilitated the spread
of human, animal and plant diseases, like HIV/AIDS, SARS and bird flu,
across borders. The AIDS crisis has reduced life expectancy in some parts of
Africa to less than 33 years and delays in addressing the problems, caused by
economic pressures, have exacerbated the situation.
Globalisation
has also enabled the introduction of cigarettes and tobacco to developing
countries, with major adverse health and
financial costs associated with that.
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4.
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Increased
global income and reduced investment barriers have led to an increase in
foreign direct investment which has accelerated growth in many countries. In
1975, total foreign direct investment amounted to US$23 billion while in 2003
it totalled US$575 billion.
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The
increasing interdependence of countries in a globalised world makes them more vulnerable to economic problems like the
Asian financial crisis of the late 1990's.
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5.
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Improved
environmental awareness and accountability has contributed to positive environmental outcomes by
encouraging the use of more efficient, less-polluting technologies and
facilitating economies' imports of renewable substitutes for use in place of
scarce domestic natural resources.
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The environment has been harmed as agricultural,
forest, mining and fishing industries exploit inadequate environmental codes
and corrupt behaviour in developing countries. Agricultural seed companies
are destroying the biodiversity of the planet, and depriving subsistence
farmers of their livelihood.
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6.
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Increasing
interdependence and global institutions like WTO and World Bank, that manage
the settlement of government-to-government disputes, have enabled international political and economic
tensions to be resolved on a "rules based" approach, rather
than which country has the greatest economic or political power. Importantly
it has bolstered peace as countries are
unlikely to enter conflict with trading partners and poverty reduction helps
reduce the breeding ground for terrorism.
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The
major economic powers have a major influence in the institutions of
globalisation, like the WTO, and this can work
against the interests of the developing world. The level of
agricultural protection by rich countries has also been estimated to be
around five times what they provide in aid to poor countries
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7.
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Improved technology has dramatically reduced
costs and prices changing the way the world communicates, learns, does
business and treats illnesses. Between 1990 and 1999, adult illiteracy rates
in developing countries fell from 35 per cent to 29 per cent.
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Trade
liberalisation and technological improvements
change the economy of a country, destroying
traditional agricultural communities and allowing cheap imports of
manufactured goods. This can lead to unemployment if not carefully managed,
as work in the traditional sectors of the economy becomes scarce and people
may not have the appropriate skills for the jobs which may be created.
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8.
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Modern communications and the global spread
of information have contributed to the toppling of undemocratic regimes and a
growth in liberal democracies around
the world.
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Modern communications have spread an
awareness of the differences between countries, and increased the demand for
migration to richer countries. Richer countries have tightened the
barriers against migrant workers, xenophobic fears have increased and people
smugglers have exploited vulnerable people.
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9.
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The
voluntary adoption by global companies of workplace
standards for their internationalised production facilities in
developing countries has made an important contribution to respect for
international labour standards. Wages paid by multinationals in middle- and
low-income countries are on average 1.8 to 2.0 times the average wages in
those countries.
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Globalised
competition can force a 'race to the bottom' in wage rates and labour
standards. It can also foster a 'brain drain'
of skilled workers, where highly educated and qualified professionals,
such as doctors, engineers and IT specialists, migrate to developed countries
to benefit from the higher wages and greater career and lifestyle prospects.
This creates severe skilled labour shortages in developing countries.
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10.
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International
migration has led to greater recognition of diversity and respect for cultural identities which is
improving democracy and access to human rights.
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Indigenous and national culture and languages
can be eroded by the modern globalised
culture.
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Source: AusAID, 2004, http://www.ausaid.gov.au/
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Source: The World Bank, 2004, http://www.worldbank.org/
United Nations Development Programme, 2004 http://www.undp.org/
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Balancing the globalisation scales
Globalisation
has costs and benefits. There have been examples of poorly managed
globalisation (eg when countries opened their economic borders before they had
the capacity to respond well) but there are also examples of well managed
engagement with the international community.
Like
it or not, globalisation is a reality. Many countries have committed themselves
to reducing poverty through the Millennium Development Goals (MDGs) and are
cooperating together to work out smart ways to manage globalisation.
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