Globalization is defined as the increasing interdependence, integration and interaction between people and corporations in different locations around the globe. In political terms it can be defined as the spread of political sphere of interests to regions and countries outside the area of the political actors. (Wikipedia 2006) The term ‘Third world’ is a lot more vague, it comes from the cold war when the third world was taken to be the area outside either of the two opposing camps. Now, however, the meaning of the term has changed and has come to represent the Less Economically Developed Countries (LEDC’s) of the world, but even this is not a fully accurate term. There is a huge difference between a Sub-Saharan state (for example Ethiopia) and a South East Asian state (for example Thailand) yet they would both be classed as LEDC’s, therefore it is very hard to determine if globalization is good or bad for the third world in general.
To form a fair critic of globalization it is important to look at the positive as well as the negative affects, and globalization has had many major benefits for the third world. In its broadest terms globalization encapsulates the free flow of ideas across the globe and there is very little argument for this being bad for anyone. It can be seen that in authoritarian third world states today there are liberal, humanist protest groups rising up to demand better human rights and a more equal democratic society. Although social democracy is not necessarily the best ideology to follow, and its pursuit has led to some bloody conflicts, globalization and the spread of ideas has allowed people in poorer areas to make a choice between different political options in a way they never could in the past.
Another reason why globalization should not be harmful to the third world is through its theoretical economic effects. Globalization should lead to increased importation and exportation of goods between countries worldwide, and because of outsourcing and comparative advantage it should cost companies less to produce their products. This combined with increased competition from global competitors should increase productivity while also working to drive down consumer prices, which should in turn lead to increased consumer spending and through various economic theories which I won’t go into, higher GDP and richer nations. (Grant 2003)
If this occurred it would allow governments to focus their attention on increasing standards of living and reducing negative factors like corruption and so should really benefit most third world countries. Combined with this is the more simplistic idea that the reduction in the price of goods globally, especially food prices helps third world countries as they can purchase more, for example subsidized US farming produce, for lower prices. Although this may well not be beneficial for the farming industries in the countries that chose this option, most third world countries believe that industrialization and a move a way from an agricultural based society is needed to increase prosperity. This means being able to purchase cheap food gives them large benefits as they need less people to farm and so will see the migration of people from the countryside to he cities that is needed for industrialization.
One of the major negative affects of globalization in the third world stems from the way international trade organizations like the World Bank and the International Monetary Fund (IMF) go about trying to help impoverished states. The IMF tells third world states that in order for them to help (by loaning money) the country in question must firstly remove all barriers to free trade and open up their markets, allowing them to become attractive to investors from the west. This very often means that the state must massively re-structure its economy to come in line with the IMF’s regulations and in return the IMF will give the country loans to strengthen their currency and help pay of the loans from Western investors. (Przeworski 2000) In principle there are no major problems with situation, it is when something goes wrong however that the problems occur.
One of the main reasons why globalization has not affected the third world in nearly such a positive way as many economic speculators predicted is due to the way that the IMF lends them money. When investing the IMF adds clauses that state that if the something goes wrong for the western investors they can bail out and are even sometimes given compensation money for the losses that occurred. Although on the surface this may sound positive as it encourages more investors to take on what more risky ventures in less economically stable third world countries it in-fact negative as it leads to speculation and means investors often pull out of a country at the first sign of weakness. (Przeworski 2000) This in terrible for the county that has been invested in because, as they have got rid of all protectionist measures and trade barriers there is nothing to stabilize the economy and so it collapses. The end result of this supposed ‘help’ then end up being a situation where the economy can never recover as the loan repayments to the IMF are to large and so living conditions remain very poor.
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
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