Are Third WorldCountries the Losers of Globalisation
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Dennis DamerAre Third World Countries The Losers1/10of Globalisation? Are Third WorldCountries the Losers of Globalisation? Economics Term PaperBy Dennis DamerSS 2002 Content: Page 1. Introduction 22. What is Globalisation? 33. The Origins of Globalisation

34. The Third World 4a. African 4b. Asia 5c. Latin America6d. Russia 75. Globalisation - the Culprit? 76. Bibliography 97. Notes 9
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Dennis DamerAre Third World Countries The Losers2/10of Globalisation? Introduction Today more than a billion people areliving in extreme poverty having lessthan one dollar a day at their disposalto live or merely to survive. Moreover,until 2015 the world’s

population willlikely have grown to 7 billion1. Add tothat 58 million HIV/Aids infectionslargely in the third world countries andmore specifically, Africa.Despite constant lamentation aboutextortionate taxes and poverty inwestern countries Europe, NorthAmerica and

part of Asia is wealthierthan ever in the history of mankind.Investors from Europe put their moneyto work in countries around the world.Wal Mart recently announced $220billion in sales for 2001 making itbigger than the economies ofIndonesia, South Africa or

Turkey².In the last two decades internationalflows of capital, goods, services,information and labour increased involume and accelerated substantially.In some industries national boundariesbecame obsolete, like remnants of a NGOs and pressure groups like

FrenchAttac or Viviane Forrester, author of“L’horreur économique”, a ferventcriticism on corporate behaviour andthe failure of politics, have accused theprocessofglobalisationofexacerbatingexistingglobalinequalities and being responsible forrising levels of poverty.

Others havestaged violent riots in Seattle andGenoa at WTO summits. In this essay I will attempt at clarifyingthe impact of globalisation on the thirdworld in particular.Medieval castle. Meant to protect, butnow without function. “The Battle of Seattle” –infamous

moment of the anti-globalisation movement
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Dennis DamerAre Third World Countries The Losers3/10of Globalisation? What is globalisation? “ (…) the tendency for the world economy to work as one unit, led by largeinternational companies doing business all over the world. Some of the thingsthat have led to

globalisation are the ending of TRADE BARRIERS, the freemovement of capital, cheap transport, and the increased use of electronicsystems of communication such as the internet: (…)”Longman Business English Dictionary, 2000This view of globalisation is probably the

most common and agrees with what iswritten in the introduction. The origins of globalisation Explaining the origins of globalisationin brief we have to look into the past.Well, some scholars might argue thathas started with the Vereenigde Oost-indische Compagnie,

aka East IndiaCompany in the 17th century or thetriangular trade between NorthAmerica, Europe and Africa. These areclearly the beginnings of internationaltrade, but to understand globalisationwe only have to go back to the eventsfollowing WWII. John Maynard

Keynes (middle) at theconference of Bretton Woods In 1944 at the conference of BrettonWoods the foundations were laid forthe IMF to provide greater security andpredictability. Three years later, theGATT was established. In threeconferences until 1994 a

considerablenumber of obstacles to free trade wereeliminated. Since 1994 the WTO hastaken the place to the GATT.The process of decolonialisationgathering momentum after WWII morethan tripled the number of states. Only,that the “Iron Curtain” cut through

theworld and created a bipolar world orderdisadvantageous to peace, securityand therefore, business and economicgrowth. Since the fall of the Berlin Wall and thesubsequent rapid disintegration of theSoviet Union the process ofglobalisation was making

stridestowards a different world order. Tradepolicy largely ceased being a productof strategic interest but was nowlargely dictated by economicrationality.As mentioned in the definition cheapertransport and new means ofcommunication further facilitated the

development.
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Dennis DamerAre Third World Countries The Losers4/10of Globalisation? The Third World Speaking in this context of one third world is rather inadequate. Some former thirdworld countries now belong to the economic middle or even upper class. Still otherscan be

divided into poor, poorer and poorest.The first step will now be too look briefly at a few countries and see how theydeveloped in the last decade(s) and examine the reasons for their economic successor demise. Lastly, we will look for possible generalisations that can

be made as towhether globalisation’s effects are negative or positive. Africa Between 1984 and 1993 the Africaneconomy grew at 2% annually. Noteven enough to make up for populationgrowth. Growth until 2001 wasslightly bigger (3,375%). To stoppoverty from

worsening Africa willhave to achieve growth rates ofabout 5%3. Having escaped western rule,African countries set off to claimtheir places in the world. Theoutlook was rosy at that time.Unfortunately, lots of countrieshad no democratic traditions andwere pressed

into representativeforms of government. Due toboundaries drawn according toEuropean interests people had to livein one state which were utterlyunprepared for this. More often thannot a strongman assumed control. Thisled to elites exploiting their countries.Sound

economic policy was largelyabsent.Although the colonial powers hadinvested in infrastructure, they hadn’ttaught their former colonies how tomaintain it or how to establish afunctioning bureaucracy, which amongother factors fostered the economicdevelopment of

Asian nations likeSingapore4. In 1960, Belgish Congohad 88,000 miles of usable road, in1985 the number was down to 12,000miles. In 1965, Nigeria’s GDP per capita was higher than that ofIndonesia. 25 years later Indonesia’sGDP was three times that of

Nigeria7.Even in Africa there are exceptions tothe rule. Mozambique over the lastdecade has been one of the fastestgrowing countries worldwide with GDPgrowth averaging at around 8% (1994-2001). Tanzania and Uganda havelikewise managed to implement asound

economic policy5.The reasons for Africa’s rather poorperformance can be summed up asfollows:• Insufficient rule of law• No lasting peace• Bad economic policies• Dependence on primary sector Somewhere in Africa
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Dennis DamerAre Third World Countries The Losers5/10of Globalisation?On the map of international businessAfrica is almost non-existent. With theexception of Big Oil and otherextracting industries, there are veryfew businesses seriously interested ininvesting in

Africa. From 1995’sinvestment in the third world Africaattracted merely $2 billion or roughly 1%6. Globalisation might be partlyresponsible for lower commodity pricesbut most African countries would bemuch better off if they would undertakeserious reforms to

open their economies, establish law and orderand say goodbye to its oftenauthoritarian regimes. Asia Asia countries have fared far betterthan most developing countries. In fact,their progress was so fast, that somecan even be counted as full yindustrialised

countries. Since Deng Xiaoping became the driving force behind modernisation inChina in 1977 the celestial kingdomhas made great advances. Havingpursued a rather pragmatic foreignpolicy China has never engaged in anywar since the Korean War in 1955.Today,

there is widespread support formarket reforms and change. The onlyaspect subject to discussion is thepace of change. The WTO entry willfacilitate this process.India is an example of a country intransition which at the same time isone of the poorest

developingcountries with more than 350 million poor. Bangladesh is one of the leastdeveloped nations in Asia and themost densely populated area stateworldwide11. Most countries in the region haveimproved their living conditionssignificantly. Taiwan’s GDP is

higherthan that of Greece or Portugal andalmost as high as that of Spain7. Theastonishing growth in especiallySingapore, Taiwan, South Korea andHong Kong can be attributed to aprolonged period of peace, soundeconomic policies and a distinct workethic. Looking

at expatriate Asianminorities this becomes even moreapparent. Asian students fare better inAmerican universities than do mostAmerican students. For centuriesChinese minorities have successfullyintegrated themselves in economies allover the world.Even the

financial crisis of 1997/98,showing the threats of uncontrolledand uncontrollable capital flows couldnot stop the Asian economic miracle.To the contrary, those countries mostaffected by the crisis have installed thenecessary systems to monitor andregulate flows of

investment. Dennis Damer Are Third World Countries the Losers 5/8Globalisation?
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Dennis DamerAre Third World Countries The Losers6/10of Globalisation? Latin America Latin American countries have achieved mixedresults over thelast decade. The World in 2000, The Economist:• Will Latin America’s brightfuture ever arrive?The World in 2001, The

Economist:• Latin America gets a tastefor wealth • Has Brazil’s moment come?The World in 2002, The Economist:• Latin America’s bad luckWell, these headlines give a goodimpressionoftheeconomicdevelopments in Latin America. Theregion’s achievement can only

bedreamed of by others countries:relatively stable democracies and openeconomies as well as free speech. Latin America is still dependant on thewestern economies as its exportmarkets. Weakening commodity pricesin the cases of copper, oil and coffee,coffee prices

have declined since 1997 by about 60%, are a major obstacle onthe way to economic prosperity8. TheCaribbean has been hit hard by aslump in the tourism industry due tothe events of September 11. Populistrulers like Chavez or the protractedstruggle between the

Colombiangovernment and the leftist FARCguerrilla have not helped the LatinAmerican cause. External debt is still too high andcountries depend heavily on capitainflows from industrialised economies.Mexico has prospered and achievedgrowth rates of roughly

3,14% since1994. This result has been underminedby the Peso crisis of 1994/959. As aresult of its proximity to the US theMexican Economy has attracted largeamounts of capital in form of foreigndirect investment (see figure). Theeconomy has faltered lately and

growthhas slowed. Much will depend onwhether Vincente Fox can pushthrough further reforms e.g. to curbcorruption.Chile has probably been economicallythe most successful country of LatinAmerica. Its GDP grew at a rate of 7%annually between 1984 and 1993

andof 5% between 1994 and 2001. It isexpected to grow by 23% for the periodof 2002 – 200510.
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Dennis DamerAre Third World Countries The Losers7/10of Globalisation? Russia and economies in transition Though not a classical developingcountry, Russia and other formerSoviet Union states were left behindeconomically after the fall of the IronCurtain. Between

1994 and 2001 itsGDP has shrunk annually by 0.7%11.Its GDP per capita is now smaller thanthat of Venezuela or the CzechRepublic. Recently the reformistcourse of president, strongman andleader Vladimir Putin as well as asurge in oil prices have

improvedeconomic conditions. Combating corruption, improving thecollection of taxes and establishing therule of law will help the country as willnegotiating its entry into the WTO.Most Eastern European countries havebeen sincerely reforming theireconomies. Some

might even harvesttheir fruits in from of joining theEuropean Union in 2005. Contrary toRussia, these countries have little incommon with the third world. The Middle East The Middle East has reaped anestimated $2 trillion (1012)in oilrevenues in the twenty years

following1973. Still, one gests the impressionthat not much has happened since. Elites suspicious to the outside world,overly religious-oriented educationsystems and political turmoil havestalled progress for decades.Economically the region can bedevided into

those states with oil and asmall population (e.g. Kuwait, Bahrein,Saudi Arabia), states with oil and a bigpopulation (Iran) and states withoutany significant oil reserves (Jordan).The last ones being especially bad offwithout oil revenues and politicalinfluence. Most

middle – eastern governmentsare today aware of the necessity todiversify there economies. Iran’s non-oil sectors will foster the overall growthof an expected 5.3%.A more than positive example is therise of Israel as the only MiddleEastern nation with a vibrant IT

sector.In a hostile environment, constantlyhaving to worry about existence itself, it has achieved a small economicmiracle – with considerable assistanceof the United States. Some states enjoy considerable riches,but the region is marked by distinctregional

discrepancies. Most of theproblems present can be found in otherthird world countries as well.
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Dennis DamerAre Third World Countries The Losers8/10of Globalisation? Globalisation – the Culprit? Even though we could only take a brieflook at recent economic developmentsin some countries around the world, wenoticed how different progressed orregressed.

Countries like Bangladeshor countries in sub-Saharan Africa arestill desperately poor. Is this the fault ofglobalisation?Most countries which are poor todayare either burdened with coloniallegacies, more often have hugeinternal self-inflicted problems orsometimes

both. Some former colonieslike Taiwan or South Korea did morethan well.There seem to be factors which arecrucial to economic success. The firstis peace. Nothing is able to destroyentrepreneurial spirit and wasteresources, human and natural, likewar.Secondly, the

rule of law. Only ifpeople are convinced they can harvest the fruits of their labour they will workand invest their gains instead ofconsuming them right away. Moreover, a supportive economicpolicy has to be implemented. Countries hostile to foreign investmentand

competition will not be able gainfrom trade and to raise the livingstandard of its people. In addition thestate needs to perform some basicfunctions and provide certain publicgoods. Among them are maintainingpublic order, an education and healthsystem and

carrying out certainadministrative functions.In the turn of globalisation, economiesare becoming more and moreinterdependent. A recession in onecountry will most likely negatively affecta dozen other countries. Globalisationis not a fashion movement in whichone

can decide whether to participateor stay clear from. Not taking partalmost certainly means going into self-imposed exile.
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Dennis DamerAre Third World Countries The Losers9/10of Globalisation?There is a direct correlation betweenthose countries which have liberalisedtheireconomies,embracedglobalisation and worked on the factorsmentioned above and those whichhave grown most

rapidly in the past. Sheltering one’s industries from foreigncompetition might work in the shortterm to fix temporary inefficiencies, butwill lead to inefficiency and loss ofcompetitiveness in the long term. Even if lots of the dilemmas in the thirdworld are self-inflicted, I

do believe thatwealth and the responsibility to use thiswealth not only towards one’s ownends but also for society as a whole,go hand in hand. The more so, assome of the existing inequalities stilldate back to decisions made by formercolonial powers.Blaming one’s

troubles on globalisationis a convenient way of distractingattention from one’s own failures. Thenotion that one does not bear theresponsibility for one’s fate iscompletelydetrimentaltowardsentrepreneurship, progress, motivationand self-confidence and the

confidencein being able to shape one’s future.
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Dennis DamerAre Third World Countries The Losers10/10of Globalisation? Bibliography Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung. 2002. Medienhandbuch Entwicklungspolitik 2002. Berlin: BMZ Referat für Presse und

ÖffentlichkeitsarbeitDossier: Dritte Welt. 1996. Heidelberg: Spektrum der WissenschaftInternational Monetary Fund. - 2001. WORLD ECONOMIC OUTLOOK October 2001. The InformationTechnology Revolution. Washington: IMF - 2002. WORLD ECONOMIC OUTLOOK

April 2002. Recessions andRecoveries. Washington: IMFLandes, David. 1998. The Wealth and Poverty of Nations. London: Abacus.Mankiw, N.Gregory. 2001. Principles of Economics. Second Edition. Orlando: Harcourt College PublishersNewsweek. May 27, 2002. New

York: NewsweekNewsweek. May 20, 2002. New York: NeewsweekThe Economist. - 1999. The World in 2000. London: The Economist Newspaper Limited - 2000. The World in 2001. London: The Economist Newspaper Limited - 2001. The World in 2002. London: The

Economist Newspaper Limited Notes: 1Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung.2002. Medienhandbuch Entwicklungspolitik 2002. Berlin: BMZ Referat fürPresse- und Öffentlichkeitsarbeit, p. 20 - 212Neewsweek. May 20, 2002. New York:

Neewsweek, p.48 - 53The Economist. 2001. The World in 2002. London: The Economist NewspaperLimited, p. 88 – 9632000. The World in 2001. London: The Economist Newspaper Limited, p.84Newsweek. May 27, 2002. New York: Newsweek, p.2952002. WORLD

ECONOMIC OUTLOOK April 2002. Recessions and Recoveries. Washington: IMF, p.43ff, p. 163ff 6Landes, David. 1998. The Wealth and Poverty of Nations. London: Abacus, p.50772001. The World in 2002. London: The Economist Newspaper Limited, p88 – 968

International Monetary Fund. 2002. WORLD ECONOMIC OUTLOOK April2002. Recessions and Recoveries. Washington: IMF, p.26ff9, 10, International Monetary Fund. 2002. WORLD ECONOMIC OUTLOOK April112002. Recessions and Recoveries. Washington: IMF,

p.164ff