GLOBALIZATION AND DEVELOPMENT

What is Globalization?
Def: Globalization refers to the processes by which flows
of trade, finance and information between countries are
broadened and deepened so that they function as one
global market. (Mohammed 2007)
Characteristics: liberalization of world trade; formation of
regional trading blocs ( EU, NAFTA, ASEAN, MERCUSOR,
CARICOM); reduction in cost of information; mobility of
capital and labour
N.B. These factors combine to increase the level of
international competition.
Although globalization began to accelerate from the
1980s it has its roots in imperialism and colonialism.
Stages of Globalization

Stage1: Imperialism - a policy of extending control or

authority over foreign territories by means of
acquisition or maintenance of empires either through
direct conquest or through indirect methods of exerting
control on the politics and/or economics of other
countries.
The Age of Imperialism began when the Europeans
Spain, France, Britain, Germany, Belgium conquered
and partitioned the Caribbean, Latin America, Africa ,
Asia, Australia and the Pacific. Modern imperialism is
driven by the activities of multinational corporations.
Stages of Globalization (contd)

Stage 2: Colonialism the extension of a nations

sovereignty over territories outside its boundaries,
often to facilitate economic control over their
resources, labour and markets.
The territories conquered by the imperialist powers
were eventually settled. During colonialism the
European culture was promoted as superior to
native culture.
 History of Globalization

1870-1913- was the first wave of globalization. Cut

short by World War I. League of Nations started
during this time by Woodrow Wilson
1945-1973- renewed vigor towards the adoption of
international organizations such as the UN, IMF and
the World Bank (Bretton Woods Agr.)
1975 to present the third phase of globalization
Facilitators of Globalization

World Bank
International Monetary Fund
World Trade Organization/ formerly the GATT
Trans-national Corporations or Multi-national
Corporations
Overview of IMF

The IMF was created in 1945 for the purpose of

providing loans to mainly western Europeans states
that were facing balance of payment (b.o.p)
problems.
Overall mission to oversee international monetary
system; ensure exchange rate stability; to foster
global monetary cooperation
IMF (contd)

The work of the IMF is of three main types:

1. Surveillance involves the monitoring of economic
and financial developments and provides policy
advice aimed at crisis reduction.
2. Provides temporary financing to countries with
b.o.p problems and loans to support poverty
reduction programmes.
3. Provides countries with technical assistance and
training in its areas of expertise.
Overview of World Bank

The International Bank for Reconstruction and

Development or World Bank is a sister organization
to the IMF. It was established in 1947.
The WB provides finance for projects to promote
development and in recent times the emphasis has
been on poverty reduction.
Policies of the WB

Encouraging free market reform policies

Liberalization of trade and capital markets
Policies of IMF and WB in the
CAribbean
Jamaica first country to embark on structural adjustment
programme. Others Barbados, Guyana, Dominica (1980s,
1990s)
Conditionalities:
:devaluation of currency in order to make exports cheaper on
the world market and discourage imports by making them
more expensive.
: higher personal taxes to increase government revenue
and new forms of direct taxation
Conditionalities (contd)

: lower taxes on businesses

: reduce public spending on services health care,
education social welfare - to citizens
: reduce the number of government employees this
would take the form of public sector retrenchment
as a means of increasing efficiency and reducing
public spending
:privatise and or divest public and state-owned
corporations
Impact of Policies

Increase in poverty and unemployment

Poor infra-structural development
Marginalization of local businesses
Increase in government debt
Overview of the World Trade
Organization
The WTO is an international organization that was
established in 1995 as a replacement for the
General Agreement on Tariffs and Trade (GATT).
Its objectives are: to liberalise world trade and
create an open global system; to supervise the
settlement of commercial conflicts.
Decision making is by consensus. Each member has
one vote.
Principles of the Trading System

WTO members are guided by 4 principles:

Non-discrimination which covers two aspects:
(a) Most Favoured Nation when a member country extends
special a benefit or preference to one trading partner, it is
obligated to give the same MFN status to other WTO
members.
(b) National treatment requires that local and foreign products,
services as well as trademarks, copyrights and patents be
treated equally (applies after same enters market).
Principles Of the WTO

Liberalisation reduction in tariffs and other barriers to

trade.
Predictability potential trading partners and investors
must know the terms of trade that exist in a country.
WTO members are bound not to place restrictions on
non-resident/ non-national service providers. Trade
rules cannot be changed to suit local conditions without
first negotiating with partners and if needs be giving
compensation in the event of loss of trade.
Competitiveness WTO rules are dictated by open, fair
and undistorted competition. The rules of non-
discrimination are designed to secure fair competition
in trade.
Benefits of WTO Membership

The system allows disputes to be dealt with through the dispute

settlement mechanisms in the agreement.

Membership brings advantages of relatively unhindered trade in

goods, services, technology and investment capital with other
WTO members.

WTO rulings in respect of trade in services and intellectual

property rights are binding on all members and legally
enforceable. Rulings may be appealed.
Criticisms of WTO
WTO treaties are said to show a bias toward multinational corporations and wealthy nations.
Small countries in the WTO do not have much influence.
Countries that are not members of WTO are effectively under an embargo.
The influential countries of the WTO focus on their own commercial interests and the needs
of developing countries are perceived to be insignificant.
The WTOs promotion of free trade may result in uneployment and increased poverty.