Question

One arguement in the debate surrounding globalization is about the inequality between developed and developing nations. Explain how reduced barriers to trade and investment might help reduce this inequality.

Answer 1

ANS.

Developing countries are effected positively and negatively in many aspects, from internal affairs to external affairs. Globalization can have very drastic impacts on a country both positive and negative. I will examine the effects both positive and negative of globalization on developing countries economy, Trade process, education and health system.

Globalization has helped less developed countries deal with the increasing economic developed in the rest of the world. This has solved the poverty problems in these countries. In the past this was impossible for less developed countries due to trade barriers. The World Bank and International Management encourage these less developed countries to go through market reform. Many countries began to move towards these changes by removing tariffs and free up their economies. Developed nations invest in less developed nations which lead to creation of jobs for poor people in the less developed countries, this is a positive outcome of globalization. However, globalization has had its negative effects on these less developed nations. Globalization has increased inequality in developing nations between the rich and the poor. The benefit of globalization is not universal. Globalization is making the rich richer and the poor poorer.

1. One way globalisation can increase inequality is through the effects of increasing specialisation and trade. A rise in trade-to-GDP ratios signifies an increase in the volume and value of trade between countries and regions. Although trade based on comparative advantage has the potential to stimulate economic growth and lift per capita incomes, it can also lead to a rise in relative poverty.

2. Globalisation might also increase inequality because it usually leads to higher profits for multinational corporations such as Apple, Google and Facebook which feed into generous pay-outs for senior executives and increasing dividends for shareholders. Multinationals matter - they generate 10 percent of the world’s annual GDP and more than 50 percent of the value of world trade. One of the hot political and economic issues of the age has been the ability of businesses operating in more than one country (a transitional company) to use shadow pricing and other forms of legal tax avoidance to reduce their liability to pay tax and thereby increase the return to those with an equity stake.

3. A third way in which globalisation can create increased inequality is by increasing the demand for and returns to higher-skilled work and lowering the expected earnings of people in relatively low-skill and low-knowledge occupations. One of the driving forces of foreign direct investment is that resources tend to flow where the unit cost of production is lowest.

International trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of gross domestic product (GDP). The rise of industrialization, globalization, and technological innovation has increased the importance of international trade, as well as its economic, social, and political effects on the countries involved. Internationally recognized ethical practices such as the UN Global Compact have been instituted to facilitate mutual cooperation and benefit between governments, businesses, and public institutions. Nevertheless, countries continue to face challenges around ethical trading and business practices, especially regarding economic inequalities and human rights violations.