Category — global issues

Trade liberalization can provide drastic economic improvements to a developing nation, in addition to bolstering environmental resource bases through technology, policy and funding. Part of Africa’s trouble is that the political instability has prevented foreign investors from assisting in the development of regional resources, in the mining industry especially. Whereas, the overall GDP of places like China, India and South America has gone up considerably in the last few decades. Several case studies can illuminate some of the positive and negative effects of trade globalization.

In Bangladesh, shrimp farming has increased 70% from 1990 to 1998. The shrimp export industry amounted to 1.1% of the total GDP, but land degradation, cattle loss, water pollution, mangrove destruction and loss of biodiversity offset the profit. UNEP discovered that profits could be improved 30% and sustainability could be ensured by: licensing shrimp farms, charging for water polluters, taxing land use and funding soil conservation, as well as mandating mixed land use for rice, shrimp and farming. Trade liberalization provides local fishers with an extraordinary opportunity to market their products around the world, but may also lead to over-saturation as more fishers race for the profit. Therefore, the government must use careful regulation to ensure that every man with a trawler isn’t out there, hustling his shrimp to foreign nations.

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UN Secretary General Kofi Annan once said, “It has been said that arguing against globalization is like arguing against the laws of gravity,” meaning that world globalization is inevitable. Therefore, instead of turning back the clock, it is up to the United Nations, nation states and non-government organizations to meet the globalization challenges head-on and ensure fairness for all parties. After all, there are undeniable benefits of globalization – such as raising the standard of living, spreading new ideas, increasing literacy rates and women’s rights around the world. Yet the impact of globalization may also include exploitation of workers, both at home and abroad, so current policies must be reshaped to discourage exploitation of certain workers in certain industries, as these problems come to light over years of painstaking trial and error.

First of all, the UN must punish nations for nonpayment of dues and enforce existing laws to maintain their moral authority over matters of globalization. Secondly, the UN needs to monitor fair trade, the flow of investment capital, activity in financial markets and restore a more functional Center on Transnational Corporations. (The center was shut down for inadequacies in 1992 but it could be set up more efficiently in the future.) Thirdly, the International Council on Social Welfare argues that the UN should adopt an “International Anti-Poverty Pact” that would mandate certain commitments to resources and targets aimed at halving the proportion of the world population living on less than $1/day (currently 22%) or the proportion of people without access to safe drinking water (20%). Other important objectives include: achieving universal primary education, reducing the gender gap for secondary education and reducing the spread of HIV. The impact of globalization can be positive if the UN establishes itself as the strong moral authority, as it was intended to be – rather than a passive vacuum for nations to push their narrow agendas through.

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Business globalization and trade globalization have spiked dramatically since 1980. The collapse of global communism and the recognized importance of foreign investment capital for developing nations have paved the way for the faster spread of ideas, products and profit. Some of the best improvements have been in the Asian markets (Hong Kong, Singapore, Taiwan and South Korea), where local industries have been deregulated and doors opened to global markets. Hong Kong and Singapore have gone from poverty in the 1950s to industrialized nation status today. While some pro globalization economists report widespread growth and improvement, others point to the negative effects and steep challenges of globalization on a local scale.

The balance between fair consumer prices, fair worker wages and worthwhile profit for investors is the first of many challenges of globalization. For many businesses looking to go overseas, the infrastructure of building a new facility, in addition to the cost of training unskilled laborers and paying taxes is huge. Some employers are willing to make that short term sacrifice because the standard of living and wage requirements are lower, which will add more padding to their pockets in the long run. Obviously, the easiest solution for a business owner is to keep the factory at home base in the United States and cut their employee benefits or wages. Therefore, to keep foreign investment capital coming into under-developed nations, there must be an open door policy and trade strategy that provides either tax benefits or relocation facilitation in the overseas nation. However, in an effort to appease big spending investors, some leaders are quick to offer everything and demand nothing for their people, which is the crux of the globalization debate.

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Ex-president Jimmy Carter once said, “Globalization, as defined by rich people like us, is a very nice thing… you are talking about the Internet, you are talking about cell phones, you are talking about computers. This doesn’t affect two-thirds of the people of the world.” He reminds us of our increasing dependence on foreign imports, which is just one of the effects of globalization. This can be scary to some of us who can’t imagine living without a cell phone or other electronic devices, but pro globalization economists remind us this also means keeping prices low.

The effects of globalization are shared by consumers, workers and nations alike. The most basic principle of economics is that competition ensures quality, drives down prices and offers choice for consumers. For workers, competition means higher wages, and sharing in the benefits of globalization. Nations can become competitors in the global market, increasing GDP and per capita incomes, while gaining greater access to raw materials.

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The history of globalization can be traced back as far as the eye can see, since trade strategy was always an important way to build nations and create superpowers. More recently, the Bretton Woods Conference of 1944 that created the International Monetary Fund was focused on creating stable world globalization. The wartime recession caused some companies to expand their borders and take greater risks to create more markets for their goods (and find cheaper labor to minimize loss). In the 1980s, the end of the Cold War freed up large markets and the Reagan administration paved the way for transnational corporations to take off from the United States, spreading a new trade strategy around the globe. Through a policy of tax cuts for businesses taking risks overseas, Reagan turned to new globalization techniques that provided foreign aid, spread out US influence and ensured more developed markets for American goods. The Clinton administration followed up the plan with the signing of NAFTA, which promised jobs and a higher standard of living for all Americans. Globalization and free market capitalism has been exported in mass quantities to Latin America, which is perhaps the best case study of failures and benefits of globalization.

The effects of globalization are especially pronounced in Argentina. Strangely enough, a Latin American poll found that 80% of the people in neighboring Chile saw the effect of globalization to be overwhelmingly positive, while 70% of Argentineans felt globalization had a negative effect on their country. In the 1990s, Argentina was the poster child of the benefits of globalization, seeing unprecedented economic growth and stability, as well as a healthy middle class populace. Real GDP growth reached 8.1% in 1997. Technological imports rose, energy development occurred, skilled labor jobs for middle class workers increased. In fact, the middle class rivaled European nations, with most workers able to afford nice cars and houses during the economic boom years. Prosperity and globalization seemed undeniably linked.

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The environment, product supply, consumer prices and American jobs are all at stake, warn anti globalization activists. While the overall effect of globalization is undoubtedly the rapid circulation of products, profits, culture and ideas, the people at the bottom are being trampled in the mad rush, some experts report. Working conditions aren’t always sanitary, wages aren’t always fair and the GDP isn’t always distributed evenly or spent improving the country’s standard of living and infrastructure. In fact, in some unstable, volatile regions, the economic hubs are patrolled by rebels looking to reap the benefits of globalization trade, charging US companies huge fees to protect their assets, thus driving consumer prices up.

It doesn’t take much looking around to see the local effect of globalization. For instance, in Buffalo, New York, the only local comedy club packed up and moved to Aruba to cash-in on the tourism industry. Foreign competition and European technological advancement after WWII led to the shutdown of the Bethlehem Steel Corporation and the joblessness of more than 7,000 workers. Trico, Zenith and Fischer-Price have all moved to Mexico. General Motors closed one of its auto plants due to foreign competition, laying off $1,700. Buffalo, once the heart of thriving economic growth, is now in a state of disrepair and economic depression, and it’s only one of many cases around the United States. Anti globalization activists also remind us of the larger scope in the globalization debate: the exploitation around the world by money-grubbing tycoons.

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