INDEX

1) Introduction 

2) Globalisation of developed economy

3) How globalisation is helping US economy.
 
4) Globalisation of developing economy.

5) Indian economy

6) How globalisation contributed to Indian economy
a) Foreign investment.
b) Infrastructure development
c) New technology
d) Reduction of poverty and unemployment
e) Reduction in gender based discrimination

7) Globalisation of under develop economies.

8) African economy

9) What are the challenges of globalisation for African countries?
  a) Opening of foreign markets for African goods
  b) Designing public policies
  c) Macro economic stability
  d) Economic security
  e) Bringing reforms to financial sector

  10) Is globalisation really helping African countries?
  a) Positive effects
  b) Negative effects
 
11) Conclusion












INTRODUCTION:

Globalisation is the most talked about thing in the world now days. Globalisation has brought many changes to world. It has changed the way trade used to take place and it has brought the world together. Globalisation can be best defined as” the ongoing social. Economic and political process that deepens and broadens the relationships and interdependencies amongst nation their people, their firms, their organization and their governments”. (1)

In this essay the effects of globalisation has been highlighted and how globalisation has helped the developed, developing and under developed countries. How it has changed the economy of the country has been discussed.

To know the true effect of Globalisation we should first know what it means in the right sense. “Globalisation is a process of interaction and integration among the people, companies and governments of different nations, a process driven by the international trade and investment and aided by information technology.” (3) It is not a new phenomenon, for hundreds of years trade is taking place between people of one country and others living in far away countries. The well-known Silk Road is an example of this, which connected China and Europe through central Asia. In the last few decades’ technological development has increased the cross border trade and investment to a large extent. After World War 2 many countries has decided to adopt free market economic systems. This has resulted in increased productivity and creation of new opportunities for international investment and trade. Taking this advantage many foreign companies has established their businesses in other countries with foreign partners this has led to over all development of economy. 

Technology has played an important role in globalise the world economy. Globalisation has helped the companies to move their business off shore this gave struggling companies a chance of survival, they can move their business to other countries and minimise their production costs. A country, which has accepted globalisation, has developed a great deal. Not long ago Taiwan was as poor as many African countries but it has opened its doors to globalisation and has developed its economy in very less time. Globalisation not only leads to economic development but it also brings social development. Many international organizations have been set up to abolish the inhuman practices. ILO is established to protect the rights of labours. Organizations like UNICEF, WHO, REDCROSS, IMF, WTO etc are established to tackle the problems which are faced by almost all countries in the world. 

 






GLOBALISATION OF DEVELOPED ECONOMY: 

I have chosen US economy to show the effects of globalisation in developed countries. 

Now days many companies are out sourcing and off shoring their operations. Out sourcing means contracting out operations that can be done in the company itself. For eg a company contracts out it’s cleaning and catering operations.  

Off shoring is a process in which a company decides to buy goods or services from the overseas provider even though they can get it from local providers. For eg: if we make a call to customer service of Optus mobiles it connects to a call centre in India. Optus is off shoring its customer care services in India. Because they are getting cheap labour in India. 

How globalisation is helping U S economy?  

Globalisation can have two sided effects on economy of a country. Although a country can lose jobs to other countries through out sourcing and off shoring. But they can gain the jobs and boost their economy through these activities. U.S is in-sourcing more when compared to what it is out sourcing. “In 2003 US has taken services from overseas countries of about $77 billion but the value of services US sold to other countries is far higher than this it is about over $130 billion.” (2) This explains why US economy is so powerful even though it is out sourcing so much. 

During 1991 to 2001 many U.S based MNC has established their branches in other countries this has resulted in creation of about 3 million job opportunities in those countries and they has also opened about 5.1 million jobs in U.S. this shows that it doesn’t mean if jobs are created abroad it wont be created in local country. To expand a business in foreign country a company needs to employ more people to monitor those activities from home country. It is true that U.S is losing jobs when a company send its operations off shore but it also gaining jobs from the investments made by the foreign companies for eg Mercedes-benz and Honda has established their manufacturing units in U.S this has resulted in many job openings in automobile manufacturing division. Globalisation not helps a particular country but it spreads overall development. U.S has helped many countries to strengthen their economy. As one product of U.S based MNC sells in other country it will create a demand for that product as the demand increases the production should have to be increased this will result in more production activity and this will result in employing more workers in production sector.

Globalisation has shown a new way to the struggling companies. Many companies those who want to cut down their production costs are now off shoring their business this is helping them to survive the tough competition. This in turn will help the economy of the country. As the companies will contribute to the economy of the country. Many US based companies has used this option and has survived in the competition. Information technology has fuelled the growth for US economy in two ways. Firstly the creation of new products in hardware and software has increased the productivity. Secondly the firms, which buy these products, reuse these products in different things. As this innovation and production of information technology became global, the costs of these products fall and it made more sectors to afford these products so the demand for IT products grew up and US became leader in IT goods and services. 

US economy is considered to be the powerful economy in the world. It is using the effects of globalisation in a positive way to promote its development. During last few years the economy has faced some problems due to war but as the war ends US will again be back on its track. 



GLOBALISATION AND DEVELOPING ECONOMIES: 

India and China are the fastest developing economies. India has recorded an amazing rate of 9.2 % growth during 2007 and 2008 and it is expected that India will achieve growth of 9.5 % in 2008. I have taken Indian economy to explain the effects of globalisation on developing economies. 


INDIAN ECONOMY: 

Indian economy has experienced major changes in during 1990. The LPG (liberalisation, privatisation and globalisation) model was introduced to achieve rapid growth and to make economy globally competitive. Measures were taken to remove industrial licence scheme and reduction in number of investment area reserved for public sector. India gained much from the LPG model. The growth rate of GDP has increased from 5.6 during the period of 1980- 1990 to 7.5% in1994-2001. In recent years the GDP was excellent at 9.2 %. It is expected that India will achieve 10% growth in GDP in the 11th 5-year plan.

According to recent statistics the foreign exchange reserves were $ 39 billion in 2000-01. It grew o $107 billion during 2003-04 and during 2005-06 it crossed $ 108 billion mark. It is expected that India’s foreign exchange reserves will cross $200 billion mark. (5)

How globalisation contributed to Indian economy? 

The following are the some of the benefits, which Indian economy has gained through globalisation. 


1) Foreign Investment: -

India has opened its doors to foreign investment in the early nineties. Its economy experienced serious problems with foreign investments during that period. “India has recently taken some new measures to liberalize FDI. That include opening up of sectors such as Insurance (up to 26%); development of integrated townships (up to 100%); defence industry (up to 26%); tea plantation (up to 100% subject to divestment of 26% within five years to FDI); enhancement of FDI limits in private sector banking, allowing FDI up to 100% under the automatic route for most manufacturing activities in SEZs; opening up B2B e-commerce; Internet Service Providers (ISPs) without Gateways; electronic mail and voice mail to 100% foreign investment subject to 26% divestment condition”.(6) . Many MNCs has established their business in India this has brought many job opportunities. Many skilled people who used to migrate out of country in search of better jobs are now working in those MNCs this has helped in preventing brain drain. These companies offer better jobs and higher pays. The average earning of the people has increased in the recent past. This in turn has increased the living standard of the people. 

2) Infrastructure development: 

  With the establishment of MNCs in India the infrastructure facilities have developed a great deal. When foreign companies establish their branches they look for all facilities. The government in order to keep their foreign investors happy they provide them with better roads and electrical and water facilities this will also benefit the people living in these areas. They will be able to use these facilities. Many big IT parks have been established in Banglore and Hyderabad and many cities of India.

3) New technology: 
 
The foreign companies brought new technology in India. Now a day’s many technological developments are taking place in India. The general public is benefited from such developments. Better medical equipments and new technology in medical field has helped many people to cure their long illness. The exchange of technology has made communication faster and easier now. In India almost 80% of population uses mobile phones. This was an object of luxury few years back.  

4) Reduction of poverty and unemployment:

The poverty and unemployment rate has declined during previous years in India. As many job opportunities are created by the MNCs people are able to earn their lively hood. Earlier unemployment rate in India was very high because there where less job vacancies in public sector and private sector investment was limited. With the liberalisation of FDI many companies invested in India and it helped in reduction of unemployment rate. Unemployment and poverty has a direct relationship if unemployment is high poverty will also be high. As the unemployment rate fell in India the poverty also declined. The poverty percentage during 1993-94 was 36.0% that declined to 27.09 in 2004-2005. It is expected that it will reduce further soon.

5) Reduction in gender based discrimination: 

India has a big problem of gender based discrimination. Women were restricted only to house hold activities. This has made many families to earn limited income. As there is only one earning member in the family who earns for the whole big family. But globalisation brought change in this structure. Now women are treated equal to men. They are employed in almost every sector. Now the income of families has increased and they can afford a better life style. As a global trend many businesses are employing women in reception jobs and customer care services. This has increased the employment rate of women. Now people are educating their girl earlier they used to think that she is related only to house hold works and she should excel in that area only. Things have changed after 1990 now the literacy rate among women has increased and they are giving a tough competition to men in education sector. 

India has achieved a significant development through globalisation with in a short span of time. We can say that globalisation has brought a revolution for Indian economy.



GLOBALISATION OF UNDER DEVELOPED ECONOMIES 

In my last part of essay I will show how globalisation is effecting the under developed countries. I have chosen African countries as a under developed economy. 

African economy:

Africa’s economy is dependent on trade, industry and natural resources. About 887 million people were living in Africa in year 2005. Africa is regarded as the world’s poorest inhabited continent. Africa has a big turbulent history. The war, despotism and corruption have not helped its economy to develop. Africa is rich in mineral and natural resources. Dr Ravinder Rena who wrote an article on African economic analysis says that “It possesses 99 percent of the world's chrome resources, 85 percent of its platinum, 70 percent of its tantalite, 68 percent of its cobalt, and 54 percent of its gold, among others. It has significant oil and gas reserves. Nigeria and Libya are two of the leading oil producing countries in the world. Further, Africa is the home to timber, diamonds, and bauxite deposits. Revenues from their extraction should provide funds for badly needed development, but instead have fuelled state corruption, environmental degradation, poverty, and violence. Rather than being a blessing, Africa's natural resources have largely been a curse”. (7) Africa has plenty in terms of natural resources and manpower but the war and corruption is not allowing it to take the path of development. Not all African countries are economically backward. The northern African countries are the richest in African continent. The South Africa is a regarded as a future member of developed countries. So far no African country is regarded as a developed economy.



What are the challenges of globalisation for African countries?

Globalisation will create interdependencies between the different countries. It will create a relationship between the developed and under developed nations that will help in promoting over all development of economy of all countries. The main challenges of globalisation in Africa are as follows 

1) Opening of foreign markets for African goods:

Many developed countries are not willing to open their markets to African goods as it will expose their local products for competition and these countries are protecting their local businesses. This is creating a hindrance in the development of the poor countries.

2) Designing public policies:

The policies should be designed in such a way to take full advantage of the globalisation. Some African countries are implementing such policies and they have achieved substantial progress in recent past. African governments have also opened their markets to foreign investments which is a good indicator for the development. 

The reconstruction of African economy is on the right track. Now governments are taking steps to rationalize their tax systems. Health and education is given higher priority now. 

3) Macro economic stability:

The countries should maintain micro economic stability and they should implement their policies in such a way to make their economy more flexible, and it should encourage diversification and should reduce the impacts of any surprised economic shock. They should also reform their labour markets and trade regime. Transportation networks, water, telecommunication and electricity should be provided at reasonably cheap rate.

4) Economic security:

There should be transparency, impartiality and predictability in the legal systems. A strong capacity is needed to create, implement and monitor economic policies. It should also remove any special privileges and exemptions given in various sectors even if they were intended to encourage economic development. 

5) Bringing reforms to financial sector:

The financial markets should be regularised and the ability of financial institutions should be enhanced to respond to the changing international environment.

If these challenges are addressed properly African countries can achieve growth and development.




Is globalisation really helping African countries?

We can say that it’s a two-way effect of globalisation for the African countries. It is benefiting in one way but it is also proving some ill benefits to these countries. We will see the positive and negative effects now. 

Positive effects:

1) Due to the technological development now investors can invest in Africa without even going to African countries. They can buy shares in African companies online. As many people are afraid to go to Africa as it troubled by wars and dictatorships.

2) Many problems faced by the African countries came to the knowledge of world through the globalisation. The media has covered the stories of famines and droughts this helped in getting massive aid in the form of food and medical facilities. 

3) Many developed countries have opened their markets for the goods of African countries. Europe has allowed flowers from African countries to be exported with out any duty or charges. This has helped the flower industry to boom in Africa.


Negative effects: 

1) Many African businessmen are saving their money in foreign banks and it is not helping their local currencies. 

2) The foreign companies, which invest in Africa, are taking their profits back to their home countries instead of investing it in Africa. 

3) The media reports of war and insecure environment in Africa has created a fear in the minds of people and no tourist wants to travel to Africa this has led the tourism industry in Africa to collapse.

4) The developed countries are dumping their goods in these countries in the name of aid this is creating competition for local businesses and there are no takers for those products because they are getting same cheap product exported by other countries. So these countries are not actually helping them by this they are creating more problems for them.

African countries are plagued by the war and anti social elements which are limiting its economy from development. As the benefits of development reaches the people the anti social activities will reduce and Africa will enjoy the global and social development. 




Conclusion:

Globalisation has brought many changes to world. It has played the role of peace maker and has brought harmony among the countries. Now countries are more inter dependent on each other so there are less chances of war among them. The technological development has made communication and business easier and faster. The trade borders have vanished and the growth and development has reached almost all parts of the world. 

Globalisation has played a major role in the development of US economy. It is a true capitalist economy thus it has taken full advantage of globalisation. The capitalistic nature of US economy suited the effects of globalisation in a good way. Globalisation not only helped US to develop its economy but it also helped it to spread that development to other countries by indulging in trade with that countries. The transfer of technology and services has helped many countries not only in economic development but also in social and human development. 

Indian economy is enjoying the phenomenon of globalisation. Its economy is developing at a rapid growth of 9.5% per annum and it is expected to achieve 10% GDP growth rate soon. India has experienced economic and social development in the last decade. Globalisation not only brought job opportunities to India but it also helped in reducing poverty and employment. The fruits of development should reach the poor in order to achieve prosperity in the true sense. In India the fruits of development are reaching the masses but not fully. But overall India has managed to take advantage of globalisation and it has achieved success in establishing itself as a preferred destination for foreign investment. Foreign investment has brought infrastructure development and regional balance in development. India has economic and political stability in country that’s why many countries prefer to invest in India. Many IT giants like Microsoft, Dell, Cisco has opened their branches in India. Many high tech jobs are created because of these investments, the overall income and standard of living of people has increased and this is contributing to the economy of the country.

African countries are facing a tough time because of ongoing political unrest. It has a big turbulent history of wars and dictatorship. This is not helping it in promoting its country for foreign investment. Many countries which are investing in Africa are just taking advantage of its resources and draining its wealth. They are transferring the profits which they make back to own countries this will not help the cause of development in Africa. Many African businessmen prefer to deposit their money in foreign banks this is effecting the banking system in Africa badly. The money is flowing out of the country but there is less inflow this is creating serious problems. Things have begun to change now many international aid agencies are working in African countries bringing in food and medical aid. International financial agencies are planning to provide much needed financial help to these countries. Many developed countries have removed duties on African goods imported in their countries this has led to foreign capital to flow in these countries. At last after decades of hardship and efforts Africa is seeing the hope of development. But it’s still a long way to go for African countries to develop their economies. 

In my view globalisation is good and it is having positive effects on economy. It has helped many countries in developing their economies and it is good for everyone. It not only brings economic development but also social and human development. It has made communication and travel much easier and faster. Now people can connect to their near and dear ones quite easily. Globalisation is good for the economic, social and human development. It is also contributing to the environmental protection causes. Many countries are participating in Kyoto protocol and GGE prevention activities which is helping in limiting the damage to the environment and achieve a sustainable development.


References:

1) Lecture slides.
 
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