|
Globalisation has become a reality in spite of projectionist
policies prevalent in many countries of the world. It is no surprise
that a man from Pakistan can use the Microsoft software while a man
from USA is able to furnish his house with the high quality carpets
from Pakistan.
Owing to high competition among the global giants, the price of
major products has gone down. Consumers have never experienced such
a wide variety of products and price ranges ever before.
However, this is not the end of the story for all the developing
countries. Many industries in the developing countries failed to
compete with the international giants, and subsequently they went
out of the market. This triggered the unemployment problem that
already engulfed these nations. Yet, empirical evidences show that
open economies have progressed more than the relatively closed
economies.
Hence, there is no doubt that developing countries should open their
economies if they are to prosper in the long run. Recent growth
rates in many developing countries are evidences to the fact that
globalisation favours growth. In fact, the export share of
developing countries in textiles, one of the major exports of
developing countries, rose from a mere 15% to 50% from mid-1960s to
1998 while that of clothing rose from around 25% to 70% during the
same period (IMF).
This is just an example from among hundreds of others. To develop an
economy, a country has to identify the products in which it has a
comparative advantage and hence, specialise in those products.
International trade is based on comparative advantage and
specialisation. A country has to seek the areas in which it has the
comparative advantage and export those goods. A country does not
gain from producing what it can but from producing the products
which are better suited to its environment.
China, a developing economy, has a large labour surplus. So, it has
the advantage in the businesses that are labour intensive. Japan is
a country which has a labour shortage. Japan cannot focus on
products which are labour intensive.
Rather it has a highly educated labour force which is able to
produce high quality products with the aid of technology. Japan
should focus on hi-tech products in order to progress. So,
developing countries can find an edge over developed countries in
different areas only if there is an open economy with few barriers
to trade.
Globalisation has allowed countries to focus on the products in
which they have comparative advantage. The need for production of
all types of goods has long been obsolete. Today, a country produces
the goods in which it is best and imports the goods it wants.
Imagine all the products that lie on the shelves in a shopping mall.
They must have come from many different countries. Imagine the
Toyota car that you bought recently or the MP3 player that has
China's seal in it, all were manufactured abroad. We consume
products from all over the world. We buy Toyota for its quality. We
buy Chinese goods for their good bargain in terms of price. We no
more produce all the goods we consume.
However, globalisation has not been taken seriously in all parts of
the world. Still there are many hindrances to globalisation.
Artificial manipulation of prices of goods has led to the
malfunctioning of the theory of comparative advantage.
USA gives a huge amount of subsidies in agriculture in which it does
not have comparative advantage. The developing countries which have
a comparative advantage in agriculture have thus become victim to
the artificial manipulation of prices. It is interesting to note
that USA alone spends 49,001 million dollars in support to farmers
every year (IMF, 2001 figures).
This is hurting the developing countries which have a comparative
advantage. This money could have been employed in some other
efficient sectors. Thus, it is like a dead weight loss to the world.
Brazil, which has a huge potential for export in agricultural
commodities, has been at a great disadvantage because of this.
True benefit of globalisation comes when there are no restrictions
on trade such that all countries can specialise on products based on
comparative advantage. It is not only the rich countries that have
hindered the growth of the developing countries through trade
barriers. Developing countries fear from globalisation. China has
not opened its economy to the full despite its entry into WTO.
The developing countries have been the victim of so-called
"protectionism myths." They believe that they need to protect their
economy to boost domestic firms.
Developing countries believe that protecting an economy will save
the jobs from going out to foreign firms. While protectionism
benefits domestic businesses in the short run, it fails to allocate
resources efficiently in the long run.
J.R. Kearl believes that import restrictions destroy domestic jobs.
He believes that by opening an economy, a country forces people to
move from relatively inefficient industries to relatively efficient
industries. So, there is no such thing as destruction of jobs, but
rather there will be a shift in the type of jobs available in an
economy.
Furthermore, developing countries are in need of new technology,
foreign investment and new skills. They can gain from these only if
they open themselves to the external world. The initial boom of East
Asian countries can be attributed in part to the huge capital inflow
from the west.
Hence, there is no doubt that globalisation furthers growth. Though
there will be some instabilities in the economy in the transition
phase, all countries will gain from the liberalisation of their
economy in the long run. Access to a large market allows countries
to specialise in the products in which they have comparative
advantage. It is imperative that developing countries opened their
economy if they are to prosper.
Ref link:
http://www.brecorder.com/index.php?id=712800&currPageNo=1&query=&search=&term=&supDate=
|
