Globalization Threat Or Opportunity To The Developing Countries Economics Essay

Globalisation is most of import factor that affects universe economic system. Harmonizing to Brittan ( 1998 ) globalization is defined “ as a whirlwind of relentless and riotous alteration which leaves authoritiess incapacitated and leaves a trail of economic, societal cultural and environmental jobs in its aftermath. ”

Some of the issues will be dealt in this paper are the impact of globalization on unemployment, the impact of globalization on the international distribution of income, the impact of globalization on universe trade. Besides that, there are two theoretical accounts in this paper, which is Feenstra and Hanson ‘s theoretical account and Zhu and Trefler ‘s theoretical account.

The procedure of globalization is a world. Globalisation has created many chances for growing and increase the degree of standard lifes. It is depends on the states who can follow the tendency and take the chance in order to better themselves.

2.0 The impact of globalization on labor

2.1 The impact of globalization on unemployment

Some oppositions of globalization argue that the developing states will hold higher degree of unemployment because of the globalization. But other economic experts are believing that there will hold a competition among the low rewards states, this will take to unemployment in developing states. It is because developed states will make the working chances to the low rewards developing states.

Brittan ( 1998 ) says that it is excessively simplistic position that globalization has lead the high unemployment in the development states. He thinks that this is because the demand of unskilled labors are decline because of the advanced of engineering. Therefore, the demands of skilled labors are increasing because the company need workers who can work and run the machine and this will better their productiveness comparison to utilizing low skilled workers.

But Nader ( 1993 ) and Brecher en Costello ( 1994 ) have the different positions with Brittan, they states that the workers has less dickering power in the planetary company because of globalization. This is true because of the fact that the boundary line between states is still existent to workers. There exist restrictions in the labour mobility of workers. Harmonizing to Scholte ( 1997 ) , there is an uncertainness on the occupation security and lower rewards because of the cross boundary line production. Therefore, globalization is non needfully bad to the workers.

2.2 The impact of globalization on rewards and labour criterions.

The 2nd labor related issued is respects to the impact of globalization on rewards and labour criterions. In order to better their fight advantages, developing states will take down their labor rewards, revenue enhancements and ordinances.

Brittan ( 1998 ) agrees that if underdeveloped states became more mutualist, it is necessary to protect their workers ‘ right. Therefore, developing states have to increase the labour rewards, but this will increase the labour criterions and this will cut down the degrees of engagement of developing states in the universe state.

Litan nut Herring ( 1995:5 ) indicated that there is a bound in the manner that states can vie in a competition in laxness. The companies who specialised in the client ‘s fiscal services will still prefer to cover with the states that the fiscal services are proper regulated.

From this reappraisal, it can be seen that developing states need to happen a manner to increase their competitory advantages in order to vie in this altering universe economic system. Likewise, the Economic Intelligence Unit ( 2002 ) has indicated that developing states can non disregard the workers right to increase their international fight. It is because developed states still need to happen the lower labor rewards states in order to take down their fabrication cost. This is the chance for developing states to be competitory in the universe economic system

3.0 The impact of globalization on the international distribution of income

Mander nut Goldsmith ( 1996 ) has indicated that the distribution of world-wide income is still imbalanced. But other economic experts has the different position with Mander, they argues that since 1960, there is an addition in the income between the states. Todaro agrees with this position, he besides indicated that between 1960 and 1982, developing states merely experienced GDP growing of 1.1 % per annum.

Masson ( 2001 ) indicated the issue that comparing the comparative degrees in the distribution in income. Manson has split it into two groups of states in comparing the degree of economic growing which is the states are actively involve in the globalization and another group is non actively involved in the globalization. Masson found that the developed states that actively involve in the globalization have grown by 3.5 % in 1880ss and increase to 5 % in the 1980. Besides that, those states which did n’t actively take portion did non gain any after 1980. “ The states that opened their economic systems grew at a faster rate than the underdeveloped states ” ( Masson, 2001 ) .

The states that opened their economic systems grew at a faster rate that the developing states ( Masson, 2001 ) . Therefore, it is incorrect to reason that globalization has caused the inequality and unequal distribution of income in the development states.

4.0 The impact of globalization on universe trade.

Oppositions to the procedure of globalization have different position on the impact of globalization on developing states.

Brittan ( 1998 ) has pointed out that globalization has increase the wealth of developed states and it besides non wider the poorness spread in the development states. Brittan states that the developing states such as Asiatic, there are an betterment in their economic state of affairs. This betterment of Asiatic states has narrowed the spread of distribution of income between developing and developed states. Although there is an betterment in their economic, but many developing states still hapless, if they can non catch up and follow the tendency of globalization.

Hak Min ( 1999 ) has the different position with Brittan on the distribution of income between developing and developed states. He indicated that this has become less skewed because globalization in the incorporate universe economic system has lead to industrial growing in a limited figure of developed states. Besides that, many states have been developed serious fiscal job. It wills wider the income spread between developed and developing states.

Hak Min indicated that during 1980-1990, 25 of 121 states in the universe broad have carry out more than 90 % of all fiscal minutess. Therefore, the low-income development states merely portion the globalise capital flows for less than 10 % of the entire minutess. These developments is seen by Gill en Law ( 1988:127 ) as the multinational phase in the development of capitalist economy.

Therefore, even developing states has tried to better their fight, but developed states are the chief accountant of the universe economic system. Globalization give the chance to the developing states to catch up, if the states utilizing the right method in the universe economic system.

5.0 Models

5.1 Feenstra and Hanson ‘s theoretical account

Feenstra and Hanson ( 1996, 1997 ) have propose a theoretical account where there is a uninterrupted goods telling where it was being differentiated by different degrees of accomplishment strength. This theoretical account assumes the procedure of green goods simple concluding goods which requires different degrees of skilled labors. They assume that developing states are able to run into the demand of unskilled labors, whilst the demands of skilled labors are able to run into by developed states. Therefore, companies will switch their production to developing states to take down their fabrication cost. Therefore, it creates the chance to the developing states since there is an addition on investing and trade liberalization. Besides that, this will increase the degree of accomplishments of developing states since they have learnt the accomplishments that transfer from the developed states.

5.2 Zhu and Trefler ‘s theoretical account

Feenstra and Hanson ‘s theoretical account have been extended by Zhu and Trefler ( 2005 ) .Zhu and Trefler have extended it to a instance that without foreign investing. Their theoretical account is referred to the Ricardian beginnings that based on the factor gift. In their theoretical account, it indicated that technological catch up by developing states, hence many companies are switch their simple procedure of production to the developing states since they are able to bring forth more efficaciously. Therefore, this will leads to a rise in skilled labor in the development states and developed states ; this mechanism is similar to Feenstra and Hanson ‘s theoretical account.

6.0 Decision

Globalization is a menace or chance to the developing states? From this literature reappraisal, it has indicated that under certain state of affairs, globalization will take to higher unemployment or instability of the states. It is decide by many factors to find whether a menace or chance is.

In this paper, I have examined this inquiry based on the impact of globalization on different facets. Undoubtedly, globalization can assist each state to better them by sharing the cognition, high trade flows between states. Optimistically, it may take to higher criterion of life and service in the universe. In other word, it may besides make the inequality between developing states and developed states, because there is a broad spread between developing and developed states. Therefore, it is hard to allow the developing states to beyond the developed states. It is depends on the policy taken by the authorities. If the state ‘s authorities is able to make the right things in the right clip, globalization will make the chance such as China is able to vie with US even China is developing states.