Globalization and Human Development

Globalization and Human Development

The main justification for supporting the move towards globalization lies in the gains that it offers to the world through benefiting from trade liberalization, specialization and international division of labor.

Opportunities and Threats

Globalization, like any other process, combines both opportunities and threats.

The most significant potential gains are production efficiency, consumer welfare, increased competition, innovation, gains from free capital movements, and enhanced labor mobility.

The most serious threats are inequitable income distribution, greater economic fluctuation (recently exemplified by the 11 September, 2001 events), the collapse of national industries, loss of cultural identity, and threats to national security. The final outcome will depend on the actions of both the country in question and the international community.

Extent of Globalization

The combination of falling trade barriers and advances in the technologies of communication and transportation have brought the world much closer.

Aggregate data show that the ratio of exports and imports to GDP has increased sharply, especially in the period following 1972.

Developing countries are now exporting more manufactured goods and less primary commodities (like food and raw materials) than before.

Trade expansion has been accompanied by unprecedented capital mobility, especially since the 1980s. The bulk of the increase in capital flows came from the private sector

(in the form of FDI and portfolio investment). The importance of capital inflow to developing countries lies, in part, in that it supplements domestic savings to levels that enable the recipient economies to grow more rapidly. Further, it enables these economies to access advanced knowledge about production techniques, management practices, and sometimes export markets.

At the same time, capital inflows can be costly. They can complicate macroeconomic management and expose countries to the risk of sudden capital flight. Data are hard

to come by on labor mobility.

Nature of Recent Globalization

The current wave of globalization in trade is characterized by: (1) a rise of intra-industry trade, (2) an increased break of production geographically, (3) new countries with high trade-GDP ratios, and (4) large exports of manufactured goods from low-to high-wage countries. As for the potential for reversal of the current wave of globalization, there are those who argue that political pressure will eventually increase to erect higher trade barriers, slow down immigration, and restrict capital flows. To others, the probability