Tuesday, May 22, 2007

Globalisation and its effects on developing countries

What are the Advantages of Globalisation for Developing Countries?

1. Inward Investment from foreign Mulitnationals MNCs. This inward investment creates job opportunities and helps to boost economic growth. Critics of MNCs paying low wage ignore the fact other wages in developing countries are generally lower.

2. Greater free Trade Increased free trade creates more export Markets.
For example, improvements in transport have enabled primary products to be sold around the globe. This increases the opportunity to make foreign currency earnings.

3. Improved Technology and information. Globalisation has enabled technology and information to be shared more easily this has helped countries in their development.

4. Positive Impact upon Agriculture

Globalisation has increased the scope for earnings from agriculture

What are Disadvantages of Globalisation for Developing Countries.?

1. Infant Industry Argument.

If developing countries wish to diversify and start new industries, they may find it very difficult to compete against developed countries. This is because they don't have economies of scale or experience.

2. Globalisation can reinforce a state of development.

A developing country may have a comparative advantage in the production of pineapples, globalisation will encourage them to specialise in their production. However, this has drawbacks.

  • Limits potential growth (low income elasticity of demand for pineapples.
  • Economy unbalanced. - fall in price of pineapples could cause serious problems for economy.

3. Free Movement of Labour

Free movement of labour may cause the highest skilled workers to leave the economy and get better jobs in developed countries.

4. Environmental costs.

Often globalistion has led to the exploitation of natural resources, such as cutting down the Amazon rain forest to increase grazing land.


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