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Urge for globalization now depleting

Globalization is the culminating point of classical economists’ (Adam Smith and Ricardo etc) theories emphasizing comparative advantage in cost of production due to availability of natural resources, capital, division of labor and most importantly location leading to specialization and expansion in production of certain goods and services by the countries and then need of exchanging goods and services among nations across the globe.

However the concept of globalization started gaining grounds rapidly with the advent of current century, which has created an environment of expansion of trade round the world accompanied with fast movement of capital and new technology particularly information technology both among developing economies and economically rich countries resulting in integration of not only global economies, but also political affairs and cultures across the globe.

The process of globalization started with the hope that it will impact favorably on entire economic process, technological development, cultural and environmental factors. Majority of the developing countries have been benefitted with regard to technological transfer, which has enabled these countries to tap economically rich countries’ markets because of improvement in quality of their products and services, resulting in fast improvement in their GDP growth rate, which in turn has reduced poverty in these countries.

India and China, who embraced philosophy of globalization very ambitiously are able to reduce poverty significantly. In view of availability of cheap labor, quite a number of corporations/ multinationals set up their manufacturing units in these countries. Information technology flourished very fast in India during last three decades and economically rich countries particularly USA is outsourcing various services with India. Development of software has made amazing progress as such forms one of the major source of exports earnings.

Developed countries on the other hand depend heavily on developing countries for raw material, food and export markets for their heavy industrial and defense goods. Besides that advancement in information technology facilitates free trade between developed and developing countries. However from the very beginning some apprehensions were there on the part of developing economies. It was assumed that globalization or global economic integration would help reducing poverty from developing economies particularly South East Asia and African countries, but instead despite MDGs agenda followed by these countries vigorously, the poverty did not reduce from majority of even middle income developing countries and instead inequality of incomes has gained grounds. China and India have been benefited, but at the same time majority of African and South East Asian countries are in a deplorable status of their economies.

No doubt corporations and Multinational companies have set up their manufacturing units in developing countries, which in a way adversely impacts economic growth process of these countries. These countries in quest for getting foreign direct investment have offered incentive by giving investors permission to remit their earnings to their countries, which in fact is draining out their forex reserves.

It is evident in case of Pakistan where foreign investors are free to remit their profits to the countries of their origin instead of ploughing back their earnings in their projects. Thus resultantly heavy forex funds go out of the country. According to recent report published in leading dailies of the country during the current fiscal year payment on FDIs for the first nine months alone have increased by 29% to $1.277 billion, thus giving big dent to country’s forex reserves.

 

However, to give space to Pakistan to be part of globalization process World Bank and other funding Agencies provided funds to undertake structural reforms to speed up economic growth rate during first decade of the present century. No doubt fiscal and monetary reforms under taken resulted in strengthening the country’s economy to some extent, but below mark trade performance specially in area of value added exports has impeded the global financial integration. Reason being the fact that economic impact of structural reforms failed to give desired affirmative economic environment. This in turn is outcome of the fact that these reforms have not penetrated deep down to address the structural rigidities both in economic and social life of the country and resultantly all efforts towards bringing in sustainable economic reforms could not bring a significant improvement in GDP growth rate and furbishing exports volume of the country and rather eroded internal economy of the country.

However with the announcement of recent federal budget one can hope for a congenial investment climate, which will prompt both foreign and indigenous capital to flow towards projects manufacturing value added products both in large scale and medium size industries of rural and urban sectors alike and will improve Country’s GDP growth rate and  exports volume substantially.

The globalization process embracing latest technologies in all sectors of economy has increased unemployment in developing countries as demand for low skilled labor has declined. The international demand for workers with specialized skills has increased. Further growing advocacy for protectionism on the part of super powers and economically rich countries particularly in context of safeguarding the interest of their work force and with inclination towards ‘nationalism’ as is apparent from US President Donald Trump’s speeches and thereafter conveying the message on pretext of restrictions on inflow of visitors/migrants from certain countries where terrorist activities are common. He assures their labor class that their rights against migrant labor class would be protected.

Similar is the case of Brexit where element of nationalism prevails. Separation from European Union is a blow to concept of globalization. An eminent economist of Princeton university Dani Roderick who from the very start of the globalization process had doubts about it’s success in view of expected growing income inequalities among nations and also within countries particularly developing countries due to inflow of new technologies in all processes of production, leading to acute unemployment problem. His views are depicted in the relevant paragraph reproduced. “Brexit vote and the election of Donald Trump set the stage for this powerful an provocative sequel exploiting the survival of democracy and globalization in the face of rising nationalism”. He advocates for giving space to developing economies for augmenting industrial development and economically rich countries to protect their workers against unfair trade practices.

In a scenario of global financial crisis and emerging trends with rich economies to get out of this crisis International Monetary Fund (IMF) have also expressed their apprehension in economic outlook report of 2007 regarding expected rise in inequality level due to introduction of new technologies and investment of foreign capital in developing countries for which skilled workforce is a prerequisite. Other economically rich nations also have some reservations regarding success of global integration program as it’s philosophy allows employers to shift their projects to low and middle income developing countries due to availability of cheap labor, which is unjust for their own labor force.

To conclude, for keeping globalization on track long term remedies are required particularly regarding capacity building of work force. For that developing countries need to make heavy allocations for education and health care for speedy development of human capital ensuring effective use of new technologies now becoming integral part of all economic activities.

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