Project Report on Globalization

GLOBALIZATION

INTRODUCTION

Globalization is about worldwide economic activity - about open

markets, competition and the free flow of goods, services, capital and knowledge. Consumers are its principal beneficiary. Its benefits in terms of faster growth, quicker access to new technology, cheaper imports and greater competition are available for all. Globalization has made the world economy more efficient and has created hundreds of millions of jobs, mainly, but not only, in developing countries. It generates an upward spiral of jobs and prosperity for countries that embrace the process, although the advantages will not reach everybody at the same time.

Globalization is the name given to the accelerated pace at which markets and economies around the world have been integrating during the past 20 years. It is driven essentially - but not solely - by free trade, capital mobility and rapid technological progress. The benefits of this greater openness - faster growth, quick access to new technologies, cheaper imports, greater competition - are too easily taken for granted. It has brought considerable benefits to countries that have embraced the process and has the potential to add further to growth and prosperity in all countries.

                  

WHEN DID GLOBALISATION BEGIN?

There is no agreed starting point, but understanding of globalisation is helped by considering the following. The first great expansion of European capitalism took place in the 16th century, following the first ircumnavigation of the earth in 1519 to 1521. There was a big expansion in world trade and investment in the late nineteenth century. This was brought to a halt by the First World War and the bout of anti-free trade protectionism that led to the Great Depression in 1930. Some see this period as an interruption to the process of globalization commenced in the late 19th century.

TRANSITIONAL PROBLEMS OF ADAPTATION

As with all great movements of change, even one as positive as globalization, transitional problems of adaptation arise. It is the responsibility of governments and business firms to ensure that such change is accompanied by socially-oriented measures to help those who lose out from the initial phases of the process. This is vital to maintain acceptance of the culture of change which globalization requires. Moreover, there can be no "one-size-fits-all approach" to globalization. Differing national and regional conditions will affect both the shape that globalization takes and the pace at which it spreads.

The expansion of trade was for many years the main driver for the integration of world markets, enabling manufacturers to compete in terms of price and quality in order to sell their products to consumers at home and abroad. The value of international trade in goods and services is expected to top $7.4 trillion in 2000, representing 23 percent of world GDP.This is up from $6.23 trillion and 21 percent of world output five years earlier.

Trade flows have been supported by inflows of foreign direct investment (FDI) as companies have sought to transfer production to sites closer to their overseas markets. The total flow of FDI is set to test the $1 trillion mark in 2000. The global stock of FDI seems set to rise above $5 trillion in 2000.

This gradual process of trade and investment liberalization began to speed up dramatically in the 1980s and 1990s as a result of a number of factors.

FACTORS.

1.LIBERALIZATION AND DEREGULATION OF ECONOMIES.

 The first of these was the decision by industrialized countries to liberalize and deregulate their economies, making them much more open. In so doing, they placed more reliance on market forces and market mechanisms and transferred some aspects of economic governance from the public to the private sector. The soundness of this decision to reduce government intervention in economic management was confirmed with the collapse of communism in 1989 together with its centrally planned economic system. Analyzing the reasons, the IMF says, central planning failed on economic grounds because it could not (or would not) respond to market signals in order to guide resource allocation or permit the competition which would have put pressure on producers to raise efficiency and to innovate.

SPEED OF MARKET INTEGRATION.

 A second factor pushing the speed of market integration is the information and communications revolution which started in the late 1980s and which resulted in the death of distance - the ability to transfer ideas, technologies and knowledge instantly across the globe. The revolution is based on the Internet, e-commerce, the convergence of computing and telecom technologies, the availability of large capacity broadband networks, and mobile communications. In addition, governments deregulated former monopolies and communications costs fell sharply in highly competitive markets. This has an impact on the way enterprises structure their management and production facilities as well as on customer habits.

OPENING UP OF INTERNATIONAL CAPITAL FLOWS.

A third force has been the opening up of international capital flows. Liberalizing financial markets means that savings can be better allocated among productive investments. Where countries have opened their national markets to outside investors, the privatization of former state-owned companies has allowed foreigners to invest in previously protected sectors. As financial markets have opened, so have the possibilities of cross-border mergers and acquisitions. This adds new options for firms seeking to expand through the more traditional channels of FDI. The market value of cross-border corporate mergers and acquisitions rose more than six fold between 1991 and 1998.

TECHNOLOGY.

Technology is another element in speeding globalization. Computing capacities are multiplying rapidly. Product cycles are getting shorter. To survive in this context, firms seek bigger markets for their products in order to secure an adequate return on investment during the products' reduced life-cycle. The high cost of product development, especially in high-tech areas, is another factor driving firms to merge or to collaborate in other, less formal, ways.

COMPARATIVE ADVANTAGES.

 Production flexibility and ease of technology transfer enable firms to manufacture products where the comparative advantages - proximity to markets, availability of inputs, wage costs, etc - are greatest. In the increasingly competitive global economy, this enables them to find new ways to cut costs, use synergies and increase productivity. The communications revolution allows for new forms of outsourcing, subcontracting, and just-in-time delivery, as well as the electronic procurement of supplies and other options offered by business-to-business e-commerce.

Globalization represents progress, capable of creating an upward spiral of wealth and jobs. But, like most advances, it moves forward in an uneven manner. Not everyone will be able to reap its benefits at the same time.

Globalization and National Sovereignty.

Governments which seek to opt out of the globalization process are at liberty to do so, though there will be a cost. They may choose the extent to which they wish to participate or to stay out. Globalization is a process, not a programme driven by any country or group of countries. The sovereignty of nations is shared, not abandoned. Governments across the world are committed to creating a market-based liberal economy, contributing to the creation of a more open world trading and investment environment. They do so on a voluntary basis. Most of them are democratically elected, acting on a direct mandate from their voters.

Despite their integration into the global economy, governments are still free to set their own rules in wide areas of economic policy - fiscal, budget and exchange rate policies, just to mention these. And, of course, governments have the ultimate choice of deciding on their degree of involvement in the globalization process.

GLOBALIZATION IS A PROCESS.

Globalization is a process not a programme. No one country or group of countries drives the agenda. But we need to adapt and adjust to this far-reaching process. This means close cooperation between like-minded governments. National sovereignty as such is not threatened since there is no coercion in this process. There may be some pooling or sharing of sovereignty as governments conclude deals which may give each much of what it wants, but not everything.

GLOBALIZATION AND GLOBAL RULES.

Globalization requires a framework of rules as the foundation of a

sound global economic order. Examples are rules to secure market access for foreign goods and services and to protect intellectual property rights and foreign investment. While more reliance on free enterprise, open markets and more competition reduces the need for detailed government regulation, governments must still provide the political and economic stability domestic entrepreneurs and foreign investors look for. An international rules-based structure is required to provide the stability, transparency and predictability which business needs to operate at global level. Some rules may be set by international organizations like the WTO or the IMF. Others may be based on voluntary agreements or business self-regulation.

Globalization needs to be better reflected in rule-making in areas like

property rights, competition and capital flows. Such a framework needs to be put in place as a complement to the unwinding of rules and regulation at national level as governments liberalize and free up national economies. Some of the rules may be based on voluntary agreements and business self-regulation. The WTO has assumed responsibilities for trade in services and for intellectual property rights.

GLOBALIZATION AND THE GAP BETWEEN RICH AND POOR
Globalization has helped raise the living standards of the world's 

poorest people. The proportion of the world population living in absolute poverty is lower than 10 years ago. Moreover, new research suggests that, when income data are adjusted to reflect purchasing power, income inequality between rich and poor countries is diminishing. Globalization cannot be seen as a one-size-fits-all cure for poverty. But it is part of a broader mix of solutions for poverty eradication involving the international community and the self-help potential of the poor countries themselves.

Globalization makes everyone who participates in the process richer. Poorer countries which embrace globalization have grown faster and enlarged prosperity more than countries which have stayed on the sidelines. Some, particularly in Asia, have reduced the gap between themselves and western industrialized countries. Following the financial crisis that hit the region in 1997 and 1998, Asia recovered sharply to show an average real growth in GDP of six percent in 1999 with expected growth this year of 6.2 percent. This compares with 3.1 percent and 3.6 percent respectively for western industrialized countries

Globalization has also helped raise the living standards of the world's poorest. There has been a significant drop in the proportion of the world population living on less than a dollar a day - from 28.3 percent in 1987 to 24 percent in 1998. But, because of rapid population growth, the absolute number of people below this poverty line has remained at 1.2 billion Calculated in terms of the human development index, a broader definition which covers education, income and life expectancy, and thanks to factors like access to clean water, health care, and hygiene, the improvement in living standards of the world's poor is more significant.

The Norwegian study also cites research which indicates that within-country inequality between rich and poor has not risen overall since the 1970s. For the 80 countries examined, within-country inequality increased in half of them and fell in the other half. This conclusion that economic growth is not biased against the poor confirms the finding of a recent World Bank study of 80 countries that the incomes of the poor rise one-for-one with overall growth . The Norwegian study reminds us that there are no simple or final answers as to how globalization affects the extent of inequality. The reduction in inequality between countries over time is partly caused by income growth at intermediate income levels; the gaps between the few richest and the few poorest countries has in fact increased; and there is considerable variation among regions. "Globalization is a complex process where some mechanisms may provoke equality and others not. Furthermore, the process occurs simultaneously with changes in technology and political conditions that affect inequality".

Globalization cannot be seen as a one-size-fits-all wonder cure for the eradication of poverty. This requires a much more complex policy mix, of which globalization is an essential part, and which will include multilateral technical and financial assistance from global institutions, meaningful debt reduction and targeted bilateral aid. It will also need to take account of the capacity for self-help of individual countries. According to the IMF, countries in East Asia and Latin America have now cut import tariffs to an average of about 10 percent, while those of south Asia and Africa remain above 20 percent. The average tariff of western industrialized countries is about 3.8 percent . The result has been that, in general, those developing countries which have adopted outward-oriented trade policies are those that have benefited most from globalization.

GLOBALIZATION AND INFORMATION TECHNOLOGIES. 

Information technologies are a key driver of globalization, opening up huge potential for greater efficiency through e-commerce, the internet and the instantaneous delivery of information anywhere in the world, at any time. They also provide greater access to information and knowledge, the raw materials of innovation, and spread the free flow of information from all sources which authoritarian regimes cannot stop even if they wanted to. Technology and innovation cut costs to the direct benefit of consumers.

Computers have become a potent production tool; they are also vital information and communications terminals. Information technologies are key to the ever - faster flow of innovation which will determine the future of regions like Europe - characterized by high labour costs and with high social and environmental standards - in the global economy. It provides greater access to education and knowledge, which are the raw materials of innovation.

Consumers are better off too. Technological advances over the past 10 years, together with the policy of governments in all parts of the world to de-regulate the telecoms sector, have reduced costs to previously undreamed of levels. The cost of some transatlantic telephone calls has now fallen by 90 percent compared with what it was 20 years ago.

Major advances in communications and information technologies are creating valuable tools for enhancing the capacity of developing countries and countries in transition to integrate into the global economy and share in the benefits of globalization. By a hazard of history, communism collapsed in time for the countries of central and eastern Europe to participate in the creation of the global information society from the ground up.

Information technologies are also purveyors of news around the world via satellite, radio, TV and the Internet. The flow is such that it can no longer be stopped by authoritarian regimes. Information empowers individuals to be critical, to make comparisons and choices also concerning their preferences for different political or economic systems. People in free societies benefit most from free markets.

GLOBALIZATION, MULTINATIONALS, SMALLER FIRMS, AND CONSUMERS.

Globalization rewards firms that are innovative and competitive, whether multinational or smaller enterprises. As global companies enter local markets, local companies enter global ones. The resulting competition increases product quality, widens the range of available goods and keeps prices low. Consumers everywhere are the big winners from the globalization process.

Even before globalization, a goodly number of multinational firms had worldwide reach, most of them American, European and Japanese in origin. They had gone global the hard way, before governments adopted the raft of measures which facilitated globalization as it is today. It is only logical that such corporations are well placed to benefit from the additional advantages of globalization.

But this is not a zero-sum game. Multinationals - defined as companies which engage in international production - will not flourish at the expense of small firms and consumers; all will flourish together. For one thing, as global companies enter local markets, local companies will move into global ones. Some of them may in turn become global players themselves. The top 50 multinational corporations from developing countries held $105 billion of foreign assets in 1997, the last year for which figures are available. There are now 60,000 multinationals of all sizes around the globe.

Globalization and openness make market access easier. Small firms which have been previously unable to export because their access to foreign markets was restricted, or because the cost of overcoming administrative or technical barriers was too high, can now sell their products and services abroad. The enlargement of their markets will enable them to produce more and benefit from scale economies, making them even more competitive. They will also benefit from the new market structures that are being created, entering profitable niche markets where discerning consumers are willing to pay a premium for speciality products.

Price increases for global products (cars, computers, home electronics) are systematically lower than those for local products and services. While consumer prices in the OECD countries increased overall by 175 percent between 1980 and 1995, prices for internationally-traded goods rose by only 40 percent. While an individual in Europe has cut the number of hours he needs to work to buy a TV set by 80 percent over the past 35 years, the cost of sending a letter, measured on the same scale, has not come down at all .

GLOBALIZATION AND FINANCIAL STABILITY

Via the integration of currency, bond and stock markets, globalization brings about a more productive allocation of savings and investment resources. Capital mobility and the communications revolution mean that technology and production can be readily transferred to locations where the comparative advantages are greatest. But increased capital mobility brings risks, especially in regions without a long-standing tradition of banking supervision. When governments get into financial difficulties, the problems are generally of their own making. But international monitoring and action is also needed to help prevent crises or limit their impact. What open markets do is to make sure that when mistakes are made, they are punished sooner rather than later.

But increased capital mobility also brings risks. This is particularly true in regions where there is no long-standing tradition of banking supervision and control. But as the 1997-1998 Asian crisis has shown, western commercial banks and their supervisory authorities were also caught out.

The Asian financial crisis is a casestudy in the way financial crises can arise. The cause was not globalization. It was triggered by weaknesses in national policies, national structures and national legislation in the countries concerned. This left many of them ill-equipped for handling the impact of short-term capital flows in and out of their economy. Western banks were also involved in the process, unaware - because of the lack of reliable data - of the degree of risk they were exposed to.

The G7 countries have set up a Financial Stability Forum which includes finance ministers, central bankers, the IMF, World Bank and the Bank for International Settlements (BIS).

But the key role in reducing financial instability lies with the countries involved, be they in Asia or any other part of the world. Focus must be on restructuring their financial and corporate sectors, as well as on broader institutional, regulatory and legal reforms which can strengthen the environment for market-based activities.

GLOBALIZATION AND CULTURAL DIVERSITY.

Globalization is a process with many facets, offering a wide range of options as it unfolds. While it integrates markets, making more and more products and services universally available, it also increases consumer choice. In addition, technology enables global products to be increasingly customized to meet the tastes and preferences of local or even individual consumers. Car buyers can now use information technology to order their own individual automobile by selecting the colour, engine specifications, upholstery, fittings and accessories they desire, transmitting the information electronically to the manufacturer.

For their part, small- and medium-sized enterprises are keen to respond to demand for speciality products for individuals or small groups of buyers in premium niche markets.

The net result is that globalization, far from creating uniformity, creates more diversity. Globalization has not created a "global" consumer. We can no longer today even talk about an average consumer. Niche markets are multiplying and consumers becoming more individualized.

The communications revolution and individual access to the internet which are part of globalization mean that governments, even less democratic ones, have abandoned their monopoly on the flow of information, thus providing many people with more cultural freedom than they previously enjoyed. If, as seems to be happening, the main messages they listen to reflect open democratic and liberal economic values, there is little risk to their cultural identity.

GLOBALIZATION AND THE WTO.

The WTO has become the most prominent symbol of globalization and the complex changes that are driving the world economy. As such it has become the target for all opponents of globalization as events in Seattle in December 1999 showed clearly. Despite the criticism, the WTO is a powerful example of a rules-based international system to promote more open trade and investment worldwide.

On the one hand, the WTO is a magnet for countries seeking to participate in the benefits of the globalization process. More that 40 emerging and developing countries have joined in the past five years and a further 30 are currently waiting to get in. On the other hand, the WTO is regarded by the opponents of globalization as the focal point for their concerns.

It may be that the WTO has become a victim of its own success. Along with its predecessor, the General Agreement on Tariffs and Trade (GATT), it has been a key instrument in opening markets and boosting prosperity through successive rounds of multilateral trade liberalization. It is also a powerful example of a rules-based international system, run by its member governments via a consensus-based system of decision-taking involving all its members.

Far from favouring the rich and powerful countries, international trade rules and WTO disciplines give the poorer countries the chance to defend themselves against pressures from powerful trading partners. The WTO is based on non-discrimination. Rich and poor countries alike can be challenged if they violate an agreement, and they have an equal right to challenge others through the WTO's dispute settlement procedures.

The second half of the 20th century saw an unprecedented expansion of world trade, which has also brought unprecedented economic growth. Since 1948, annual economic statistics have invariably shown growth in world trade outstripping economic growth. In other words, trade has been the engine of economic growth. This means that economic activity is more and more dependent upon trade as the years go by. The World Bank has estimated that a 40 percent cut in trade protection by 2005, through the reduction of tariffs in manufacturing and of other trade barriers in agriculture and services, would boost global output by about 500 billion dollars.

In 1998, world merchandise exports were worth over five trillion dollars, and in volume terms that represents an 18-fold increase over 1948. Although the world's population has more than doubled, to reach six billion this year, exports per capita are eight times as high in real terms as in 1948. The figures are so huge that it is difficult to take them in. Behind them is the reality that trade has contributed enormously to world growth and prosperity over the half century, bringing better jobs and more resources for education, health and other social spending. Despite the poverty that still exists in too many countries, the fact is that the world is far more prosperous now than it has ever been.

GLOBALIZATION AND THE POOREST REGIONS.

Globalization has stimulated entrepreneurship and empowered people and countries in a position to participate in the process. This is not the case for the poorest nations. They need technical and financial assistance to acquire the tools to join the process of globalization. This requires a major joint effort on their part and on the part of the international community. They must adopt policies aimed a providing better government, reinforcing macroeconomic stability, liberalizing their economies while creating fair tax structures. The international community needs to act to reduce the debt burden of the poorest countries and to improve market access for their exports. Crucial to enabling the benefits of globalization to spread to all mankind is the maintenance of peaceful conditions between and within sovereign states.

All countries can and must participate in the gains from globalization. There are many examples, particularly from Asia, of countries freeing themselves from poverty by export-oriented production and by opening their home markets to foreign goods, investments and technology. Globalization has stimulated entrepreneurship and empowered those people and countries who were in a position to participate in the process. But this is not the case everywhere.

The poorest nations need technical and financial assistance to acquire the tools to enter the process of globalization and to benefit from its advantages. Multilateral development agencies and bilateral assistance from governments should give special attention to capacity-building in least developed countries, particularly in areas like human resources and skills acquisition, physical infrastructure and institutional reform, to assist them raise and attract investment and to link themselves into the global information society.

This solution will need to be a combined effort on the part of the poorest countries themselves and the international community. The policies adopted by the least developed countries need to be a combination of:

• Promoting peace, security and the rule of law as essential preconditions for local entrepreneurship to flourish and for foreign business to invest;
• Reinforcing macroeconomic stability through prudent fiscal and monetary policies;
• Harnessing market forces and competition for development by liberalizing external trade and payments and progressively freeing their domestic economies from price controls, subsidies and other constraints which distort their national market;
• Strengthening the financial and legal systems and combating corruption;
• Improving the quality of government by making it more accountable and transparent as well as by raising spending on education, healthcare and essential infrastructure;
• Putting in place tax and income distribution systems which are efficient and equitable.

The priority tasks of the international community are threefold:

• To reduce the debt burden of the poorest countries. This is not going to solve all their problems. But significant debt reduction, undertaken in a strong policy framework, will help underpin the reform process;
• To focus the technical and financial assistance of the UN and its agencies on helping those countries with particular difficulty in attracting foreign investment;
• To get advanced countries to reform their trade policies where they discriminate against developing countries. This is particularly the case in agriculture and textiles.

The European Union has recognized the need for special help for the least developed countries in the revised version of the Lomé Convention, which links the EU with 71 developing nations in the Africa-Caribbean-Pacific (ACP) regions. The thrust of the convention is to support the ACP countries in their bid to participate in the global economy through the creation of regional free trade areas, and the withdrawal of their preferential access to EU markets for their exports. But the poorest of the ACP countries, for whom such participation is a more distant prospect, will continue to benefit from a preferential trade and aid relationship with the EU.

GLOBALIZATION AND EMPLOYMENT.

At world level, globalization creates jobs hundreds of millions of them not unemployment. These are mainly in the developing countries, but they are only marginally at the expense of jobs in advanced countries. In fact, fewer than five percent of the EU workforce are in direct competition with workers in low-wage countries. Europe's unemployment is largely structural and predates globalization. Sharing the gains from globalization means that workers and firms in advanced countries need to be more adaptable to improve competitiveness, skills and productivity. 
The gap between the rich and poor nations of the world is increasing. Over the past ten years, the number of people earning $1 a day or less has remained static at 1.2 billion while the number earning less than $2 a day has increased from 2.55 billion to 2.8 billion people. The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995.

By the late 1990s the fifth of the world’s people living in the highest-income countries had:

• 86% of world GDP—the bottom fifth just 1%.
• 82% of world export markets—the bottom fifth just 1%.
• 68% of foreign direct investment—the bottom fifth just 1%.
• 74% of world telephone lines, today’s basic means of communication—the bottom fifth just 1.5%.

Critics of globalisation say that rising inequality is the inevitable result of

market forces. Given free reign, market forces give the rich the power to add further to their wealth. Hence, large corporations invest in poor countries only because they can make greater profits from low wage levels or because they can get access to their natural resources.

PRO-GLOBALISATION

International organizations:

1. THE WORLD TRADE ORGANISATION (WTO).The WTO was established in 1995 to administer the rules of international trade agreed to by its 123 member countries. These rules have been ratified by the parliaments of all members.
The key difference between the WTO and the General Agreement on Tariffs and Trade (GATT), which it replaced, is that the WTO is a permanent organisation with the judicial powers to rule on international trade disputes. The WTO also covers trade in services, whereas GATT only covered trade in goods.

2. THE INTERNATIONAL MONETARY FUND (IMF).The IMF was established in the wake of the World War II in 1946 to:

• promote international cooperation on finance,
• encourage stability in exchange rates and orderly systems for exchanging money between countries
• providing temporary assistance for countries suffering balance of payments problems

The IMF frequently seeks institutional reform in the countries to which it provides temporary financial assistance. Like the WTO, the IMF believes that world prosperity is enhanced by greater exchange between nations and that this is made possible by everyone agreeing to abide by rules. The IMF has 182 member countries.
3. THE WORLD BANK.
The World Bank provides loans to poor countries for development projects. The bank provides loans for investment projects, such as water and sanitation, natural resource management education and health. It also lends for what it calls adjustment projects, which are to support governments undertaking policy reforms, such as improved public sector management.

4. THE UNITED NATIONS.Established at the conclusion of the Second World War, the United Nations has become a promoter of globalisation, arguing that individual states have a dual role with responsibilities to both their own citizens and to the world society as a whole. The United Nations says the broader global responsibility requires international institutions. It supports the case for reform of international institutions, including its own Security Council, to make them more representative.

5. THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD).The OECD develops economic and social policy for its 29 members, which include the countries of North America, Western Europe and Japan, Korea, Australia and New Zealand. It provides economic arguments for globalisation, such as data demonstrating the positive contribution made by multinational corporations to economic development.

THE WORLD ECONOMIC FORUM (WEF).
The WEF is a private not-for-profit foundation that operates conferences for business, political, intellectual and other society leaders. The WEF holds an annual conference in the Swiss town of Davos, where it is based, and also holds regional conferences around the world. It has no decision-making power, but many of the world’s business and political leaders discuss issues of importance at WEF meetings.

ANTI GLOBALISATION

The gap between the rich and poor nations of the world is increasing. Over the past ten years, the number of people earning $1 a day or less has remained static at 1.2 billion while the number earning less than $2 a day has increased from 2.55 billion to 2.8 billion people. The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995.

By the late 1990s the fifth of the world’s people living in the highest-income countries had:

• 86% of world GDP—the bottom fifth just 1%.
• 82% of world export markets—the bottom fifth just 1%.
• 68% of foreign direct investment—the bottom fifth just 1%.

74% of world telephone lines, today’s basic means of communication—the bottom fifth just 1.5%.  There are two strands to the argument that globalisation is undermining nation states. First, it is that it is empowering corporations at the expense of the nation state, and secondly, that the international institutions such as the WTO and World Bank are not democratic. There is an issue of sheer size. It is noted that many corporations are larger than nation states – more than half the 100 largest economies in the world are corporations. The sales of Ford and General Motors combined are greater than the combined GDP of sub-Saharan Africa while those of the six largest Japanese trading companies are almost as big as all the nations of Latin America combined.
Critics of capitalism say the problem starts with laws of the early 19th century, which meant individual managers, and directors could not be held liable for the actions of the corporation. It is argued that globalisation was not a democrat choice but was pursued by corporations to suit their own ends of maximising profit by playing one nation off against another.

UN Secretary General Kofi Annan describes globalization as "an irreversible process, not an option". He says it is a positive force, but it is also blind and therefore needs to be carefully harnessed.

His report says that national efforts to meet the challenges of globalization, in particular institution-building, are necessary but not sufficient. Action on a global scale, involving multilateral institutions as well as the world's leading economies, is imperative.

Globalization demands greater responsibilities from all countries, according to the UN Secretary General's report. It says that for developing counteries, integration into a globalized and highly competitive world economy entails many new challenges.

The report lists these as:

• creating and sustaining a sound macroeconomic framework and an appropriately open, favourable and stable environment for trade and investment flows
• building economic and social infrastructures and institutions
• creating social safety nets
• undertaking sustained efforts to enhance the efficiency and flexibility of their economies through continuous human resource development as well as more effective, participatory and accountable governance.

Globalization and Economic Disparity

Actually globalization has become a practical necessity in a world where we are acted upon globally, where decisions affecting our lives are taken at levels far, remote from ordinary democratic practices that no citizen has a hope of influencing them.    

Since the early 70s, major changes have taken place in the global economy. The direction of power has been moving towards regional and global institutions and out of reach of the democratic controls at local levels. These developments were the key to it. The “Trilateral Commission” has been moving quietly to establish a “Borderless” world in which the international corporation would be free of interference from the local state so that they could compete effectively in the new world order.

The trilateral commission brings together the corporate and political leaders in an organization designed to serve transnational corporate interest and tie them to the ambition of the powerful politician. Eight members of the cabinet of George Bush are its members. The commission has a smart policy which does not allow members to remain on the commission while holding high profile position.

          In the seventies the G7 (main promoters of the WTO plan) mainly through the World Bank and IMF began lending large sums to the third world nations whose corrupt political leaders and business community often profited while the general public suffered. Those nations have had a struggle at their hands in trying to pay of these debts ever since. That’s where the exploitation comes into play. Debtor nations are told the way out of debt is to export more.

          Evidence shows this can not be done. The main problems have been the burden of debt servicing and the flight of capital by the corrupt ruling elite to the rich countries. Both play significant role in causing big  deficit to the balance of payment of these poor nations. Annual financing required to bridge this huge gap makes them more and more dependent and on the World Bank and IMF.

Facts and figures

          According to an IMF report, the total external debt of the developing countries at the end of 1990 was estimated at $2,083.2 billion which was 163.2 percent  of their estimated receipts from exports of goods and services. The ratio of the developing countries external debt to their Gross Domestic Product (GDP) in 1999 was 38.3 percent while external debt servicing in the same year was estimated at 27.8 percent of their exports of goods and services.

          The total external debt of these poor countries has grown rapidly in the last three decades. It was $ 75 billion in 1970; by 1980 it had reached $639 billion, far more than eighth times of the 1970 figures. By 1990 it had more than doubled to $ 1,341 billion. By the end of 2000 it was estimated at $ 2,038 billion. Thus in there decades, the developing countries’ external debt has grown a staggering 27 times its size in 1970. The funny side of this exploitative plan is that in1980, these poor countries of the South owed the North $639 billion. Ten years later, having paid about $1280 billion in debt servicing, they still owed $ 1,341 billion by 1990.          

          In order to meet the debt obligations, the poor countries received new loans worth $292 billion in 2000. While the amount poor countries paid to the rich countries was $269 billion. These transfer were exclusive of the heavy transfer made by the MNCs and corrupt elite of these poor countries. How can they grow in these gloomy conditions.

Globalization and Pakistan

          Same is the case with Pakistan. In 1991 Pakistan’s total foreign debt was $ 17.295 billion which has risen to $ 39.5 billion till now in 2001. Today Pakistan is bound to pay about. $ 4 billion per annum as debt servicing which is the major reason behind our $ 2 to $ 2.5 billion of annual current account deficit causing a fiscal deficit of $ 3.2 billion (as in FY 2001-02). And we as an independent nation has no other option left with “Certain” conditionalities attached to it, constantly growing burden more!

          It is due to these unjust policies of G-7 and our blind faith in their recipes that today the world is divided into North and South regions. And the prevailing class-culture clearly depicts the economic disparities are as a major threat to the world peace today. And it is due to this so-called capitalist globalization that the global resources are constantly expanding but the resourceful hands are constantly shrinking in numbers.

          According to the UN figures, out of total 6 billion global inhabitants, about 1.5 billion are struggling to survive below the extreme poverty line while half of the global population’s average daily income is below than $ 2 per head per day.

Free Market Economy and U.S.A.

          In the richest free market economy, the United States, the number of people living below the extreme poverty line are more than 55 million and 23 percent of the total US population are making less than the official poverty line. Furthermore, according to the US congress budget office, during the 80’s decade only one percent Americans took care of the 70 percent of the Gross National Production and today only one percent Americans capture more than 40 percent share of the total US resources. According to another report, on the list of the ten wealthiest personalities of the world, there are seven Americans while only a few years back there were only two Americans who made to the list. It is quite evident now, how the international capital is shrinking into a very few Western and specially the American hands through these transnational corporations.

          Today the World’s 80 percent resources are captured by only 10 percent richest persons. According to the ILO, currently the global unemployment ratio is 33 percent of the total employable population. The world population at the current pace will get doubled in the next 50 years which will mean nothing else but more than doubled poor worldwide. Because by that time, the world’s 80 percent production is reliant on 1000 big corporations. It is due to this so-called capitalist globalization that the rich is getting richer while the poor is getting poorer with the every passing day. And due to this unjust, exploitative economic system, the world is splitting into North and South factions while at the same time the global societies are splitting into the rich and poor classes resultantly almost vanishing the middle class from the scenes.

          If I am wrong in my perception and the G-7 claims to be sincere in it’s approach then let me suggest three very basic amendments as a mutual confidence building measure in the WTO’s globalization plan 2005 for promoting international peace and harmony.                            

Conclusion 

·        Ban the exports of conventional as well as non-conventional arms internationally because its not only contradictory to the international peace advocacy but also takes a big tole of the poor countries’ foreign exchange.      

·        Gradually write off all the debt of the poor South or at least freezer them by making them interest free.

·        Announce to make this world visa free along with declaring it terrify zone for globalization for flourish.

     The more a country is integrated into the world economy, the more it is affected by economic and political events abroad. Globalization shifts the debate about market mechanisms and competition from the national to the international level.