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.

Related:

• Essay: Effects of Globalisation on developed and developing countries
• Definition of Globalistation
• Effects of Globalisation on UK Economy
  

Does Globalisation benefit both developed and developing countries?

Globalisation involves the increased integration of national economies. It means a reduction in barriers of trade and investment between different economies.

The benefits of globalisation are related to the benefits of free trade.

1. Consumers will have a wider choice of goods, and prices are likely to be lower. Globalisation has been an important factor in the falling price of manufactured goods.

2.Globalisation gives an opportunity for domestic firms to export a wider market. Export led growth has been an important factor in increasing economic welfare in Asian countries.

3. Globalisation enables increased specialisation of production. This specialisation enables firms to benefit from economies of scale. This leads to lower average costs and increased efficiency.

4. Globalisation causes increased competition between different firms and countries. This puts pressure on firms to be increasingly efficient and offer better products for consumers.

5. Increased Inward Investment. The process of globalisation has encouraged firms to invest in other countries. For example, many firms are relocating call centres to countries like India, where wage costs are lower. This inward investment benefits developing countries because it creates employment, growth and foreign exchange. Some foreign companies are criticised for exploiting cheap labour. But often the wages are higher than otherwise.

Problems of Globalisation

1. Developing Countries May Struggle to compete.

If a developing country wishes to develop a new manufacturing industry, it may face higher costs than advanced industries in the west, who will benefit from years of experience and economies of scale. To develop an industry it may be necessary to have protection from cheap imports; this gives the firm chance to develop and gain economies of scale.

2. Globalisation keeps Developing countries producing primary products. Developing countries may have a comparative advantage in primary products, however, this offers little scope for economic growth. Primary products have a low income elasticity of demand. Therefore, with economic growth demand for products increases only slowly. Primary products often have volatile prices, this can cause the economy to be subject to fluctuations in income

3. Multi national Companies may be able to force out local retailers, leading to less choice for consumers and less cultural diversity.

4. Movement of Labour. globalisation enables workers to move easily around. however, this may cause the highest skilled workers of developing countries to leave for better paid jobs in developed countries.