PROS AND CONS OF GLOBALISATION
While developing countries which, in the past, were against globalisation, have wide opened their doors for globalisation, many people in developed countries like USA are angry against globalisation. American jobs and wage levels are severely affected by the influx of cheap imports and shifting of production to low cost overseas locations. According to a Business Week/Harris poll in early 2000, more than two-thirds of Americans believe that globalisation drags down U S wages. A strong majority of the Americans feel that trade policies have not adequately addressed the concerns of American workers, international labour standards, or the environment. The important pros and cons of globalisation according to the above survey are the following. Productivity grows more quickly when countries produce goods and services in which they have comparative advantage Living standards can go up faster.
- Global competition and imports keep a Hd on prices, so inflation is less likely to derail
- An open economy spurs innovation with fresh ideas from abroad.
- Export jobs often pay more than other jobs.
- Unfettered capital flows give the US access to foreign investment and keep interest rates low.
- The adverse effects of globalisation according to the survey are:
- Millions of Americans have lost jobs due to imports or production shifts abroad. Most
find new jobs that pay less.
- Millions of others fear losing their jobs, especially at those companies operating under
- Workers face pay cut demands from employers, which often threaten to export jobs.
- Service and white collar jobs are increasingly vulnerable to operations moving offshore.
- U S employees can lose their comparative advantage when companies build advanced
factories in low-wage countries, making them as productive as those at home.
True, globalisation can benefit the developing countries in several ways. It is, however, apprehended that unregulated globalisation will cause serious problems for developing countries.
The almost universal acceptance of the market economy and the globalisation driven by private enterprise tend to aggravate most of the harmful effects traditionally attributed to neocolonialism.
The global dominance of industries by MNCs is on [he increase. Many countries are indiscriminate in liberalising foreign investment. Pepsi, Coke and L’junk foods” are allowed even in countries like China.
A number of countries allow high foreign stake even in industries where that is not really required. This could affect domestic enterprise of developing countries.
There has been a large number of cases of takeover of national firms by foreign firms. In some of these cases, the domestic firms are driven to a situation of having to hand over the majority or complete equity to the foreign partners of joint ventures because of the inability of the Indian partners to bring in additional capital or some other incapability.”
Replacement of traditional and indigenous products by modern products, resulting in the ruin of traditional crafts and industries and the livelihood of people in these sectors have also been happening in several countries.
There should also be benefits for employment from a liberal financial regime. Removing restrictions on capital flows should attract more FDI, creating more jobs for the poor by integrating them into international systems of production.”24
It is criticised that developed nations receive most of the FD1, A very small number of the developing countries, which are the relatively developed or large or fast growing in the developing world account for the lion’s share of the FDI flows to this category. What the critics do not appreciate is that, as foreign investment flows are based on economic rational, it is unrealistic to expect the pattern of flow to be different.
Another criticism is that the liberalisation increases the economic inequality. Even in China, the liberalisation has created many island of affluence. If inequality increases because of the worsening of the living conditions of the poor, it certainly is unjustifiable. But, if the increase in inequality is the result of improving the economic conditions of a section, while there is no economic deterioration of any section, or because of the disproportionate benefits, the question is whether the economic progress of some sections should be curbed so that there will not be a widening of the inequality.
The liberalisation may increase inequality. Further, several sectors and sections may not directly and immediately benefit from mere liberalisation. There may also be shocks and other adverse effects on the weaker sections. It is, therefore, necessary that there should be real socioeconomic reforms rather than mere liberalisation. Targeted poverty eradication programmes and social safety net are very important.
The fast growth and overall development resulting from liberalisation could have a major’ impact on poverty. Naisbitt points out that there were an estimated 200 to 270 million Chinese -living in absolute poverty in 1978 (the year in which the liberalisation began) and their number came down to 100 million by 1985.2 Foreign capital has significantly boosted investment and economic growth in China. China has leaped forward on the export front too. Foreign funded enterprises contribute a substantial chunk of the exports from China. Other countries which carry out proper reforms in real earnest should also” be expected to reap such gains in varying degrees. But-, half-hearted and confused measures and implementational problems may create more problems than they solve.
Although the MNCs, by the virtue of their size and resources, have certain advantages they may also have limitations or disadvantages in certain spheres or aspects of business. Small and medium firms often have some edge over the very large ones in respects of standardised products -or technologies like greater flexibility and adaptability, lower overheads, intimacy with the customers, etc. Lower costs is a great advantage which firms from developing countries enjoy. It may be noted that the major component of growth of several India pharmaceutical firms is the foreign market. They are relying mostly on bulk drugs and generics.
What is often ignored while discussing the impact of the product patent is that patented drugs account for only about 15 per cent of the India drug market. There are several more products which. would go off patent in the coming years which can also be taken up the India firms. The new patent regime should be expected help the Indian industry by prompting it to give added thrust to R&D and thereby enabling Indian firms also to develop patented products. Positive signs are already there on the horizon.
There are also many evidences of the better technology brought in by the MNCs inducing or provoking Indian firms to absorb “similar technology leading to their enhanced competitiveness and market expansion.
Department of Commerce
Periyar University, Salem-11