Globalization and its impact on development

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Globalization and its impact on development

• Development Studies 200
• October 15, 2008

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Globalization is associated with time and space
contracting

• Growing liberalization of trade (in goods and
  services and in money), and accelerated
  integration into a global economy
• Growing dominance of Western forms of political,
  economic, and cultural life
• Proliferation of new information technologies,
  intensification of and acceleration of global
  communication
• Weakening of local and national boundaries in
  many areas of human endeavour
• Weakening of the role of the State relative to
  the role of the Market
• http//www.corporations.org/system/top100.html
• The State has become to small for the big
  problems and too big for the small problems
  (Wade Davis)

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Globalization Major decision-makers

• Bretton Woods Institutions World Bank, IMF and
  World Trade Organization.
• Washington consensus Rules imposed by World
  Bank, the IMF, in consultation with US to
  encourage deregulation, privatisation, free
  trade, export oriented growth
• Transnational corporations (TNCs/MNCs)
• Leaders of the G-7, now G-8
• Canada, France, Germany, Italy, Japan, Russia,
  UK, US

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Reaction

• We have global governance without global
  government, one in which a few institutions the
  World Bank, the IMF, the WTO, and a few players
  finance and trade ministries, closely linked to
  certain financial and commercial interests
  dominate the scene, but in which many of those
  affected by their decisions are left almost
  voiceless
• Joseph Stiglitz, 2002
• (author of Making Globalization Work and
• Globalization and its Discontents)

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Reaction by States and by Civil Society

• South-South linkages to reduce dependency on
  Northern markets
• Brazil, India, China, South Africa (BRICs)
• Shanghai Cooperation Organisation China, Russia,
  Kazakhstan and other former Soviet territories
• Rise of social movements in the Civil Society
  sector to protest unequal benefits and promote
  alter-globalism
• World Social Forum, 2001 Porto Allegre, calling
  for a fair system of trade, full employment,
  guaranteed basic goods such as education and
  health, local prosperity, sustainable growth

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In light of the current global financial crisis

• The World needs a new Bretton Woods agreement
  to make the architecture of the global financial
  system fit for the purposes of the 21st century
• Gordon Brown,
• UK Prime Minister,
• October, 2008

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State, Market, Civil Society actors
The media
NGOs
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State, Market, Civil Society actorsExpansion of
the market, decline of the State
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Trade and GrowthSince the early 1980s

• of international exports coming from
  developing countries rose from 25.8 (1980) to
  35.7 (2001)
• of people living below 1/day has halved since
  1981
• Foreign direct investment (FDI) in developing
  countries has increased from 3.4 billion (1970)
  to 162.4 billion (2002) (developed countries
  460 billion)

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Enjoying the benefits of globalization in
tradeGrowth with equity in China and the East
Asian tigers (Korea, Taiwan, Hong Kong,
Singapore)

• These countries have done in 30 years what took
  the West 300
• Michael Edwards, 1999.
• Government policies to boost productivity
  equitably
• Land reform
• Investment in rural infrastructure
• Government subsidised credit to boost rural
  industry
• Large scale industrialisation, based on success
  of rural industry (tax incentives)
• Export led growth built upon agro-processing,
  followed by labour- intensive export manufacture
  (lower cost and higher quality products)
• Low wages kept factors of production competitive
• Trade liberalisation allowed only after
  protection of industrial base during its infancy
• Politically motivated support from the US
  (preferential trade for Korea, Taiwan)
• Confucian heritage Respect and reverence for
  authority, work ethic, high value placed on
  education and self cultivation, egalitarian ethos

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Locked out of the benefits of globalization?Sub
Saharan Africa Evidence of crisis(Source
www.unicef.org. Downloaded, October 18, 2008)
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Sub-Saharan Africa Reasons for crisis

• Devastation by slave trading and colonial
  exploitation
• Arbitrary boundaries little geographic or
  ethnic logic to the nation state led to weak
  states and civil conflict
• Long term decline in terms of trade for export
  commodities in relation to manufactured imports
• Low levels of investment in the economy
• Marginalization by global economy, especially
  since the end of the Cold War
• Lowest levels of domestic savings in the world
• Further declines in capacity due to Structural
  Adjustment Policies of the 1980s decimated
  health care, education and other public services
• Inability to pay off debts accumulated since the
  1970s
• Emigration of skilled and professional people
• Corruption, weak governance and political
  instability a disincentive to invest

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If you have your hands in another mans pockets
you walk where he walks (African proverb)
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Tackling poverty and inequality The response of
Official Development Assistance (ODA)

• 1960s Post war official development assistance
  (ODA) to catalyze economic growth (modernization
  theory)
• Development Economists assumed the benefits of
  economic growth would trickle down to the poor
• 1970s Redistribution with growth (RWG) Basic
  Human Needs (BHN)- health, education, shelter,
  water
• Not charity but a way of increasing capacity of
  the poor to be productive
• Yet, it legitimized the task of ODA to address
  poverty reduction as a separate goal from
  economic growth
• 1980s
• The Washington Consensus World Bank, IMF agreed
  with US advisors that poverty reduction should
  take second place to debt service and structural
  adjustment
• UNICEF led the way for adjustment with a human
  face i.e. special measures to protect the most
  vulnerable during structural adjustment. UNDP
  came up with Human Development Index (HDI)
• Developing country governments End of Cold War
  drew attention to weak governments, lack of
  public accountability, and high levels of
  corruption

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Tackling poverty and inequality The response of
Official Development Assistance (ODA)

• 1990s The Millennium Development Goals
• Return of a focus on poverty reduction in ODA
  programming
• Lead by Jeffrey Sachs (The Millennium Development
  Project)
• But donors are not providing adequate funds.
  Sachs estimates donors need to commit 0.54 of
  GNP by 2015
• Instead, in 2006, average for all DAC members was
  only 0.3, and the increase was mostly accounted
  for by expenditures in Iraq and Afghanistan.
  Little change in non-emergency ODA to sub Saharan
  Africa