GLOBALIZATION AND DEVELOPMENT What is Globalization? Def: Globalization refers to the processes by which flows of trade, finance and information between countries are broadened and deepened so that they function as one global market. (Mohammed 2007) Characteristics: liberalization of world trade; formation of regional trading blocs ( EU, NAFTA, ASEAN, MERCUSOR, CARICOM); reduction in cost of information; mobility of capital and labour N.B. These factors combine to increase the level of international competition. Although globalization began to accelerate from the 1980’s it has its roots in imperialism and colonialism.

Stages of Globalization Stage1: Imperialism - a policy of extending control or authority over foreign territories by means of acquisition or maintenance of empires either through direct conquest or through indirect methods of exerting control on the politics and/or economics of other countries. The Age of Imperialism began when the Europeans – Spain, France, Britain, Germany, Belgium – conquered and partitioned the Caribbean, Latin America, Africa , Asia, Australia and the Pacific. Modern imperialism is driven by the activities of multinational corporations.

Stages of Globalization (cont’d) Stage 2: Colonialism – the extension of a nation’s sovereignty over territories outside its boundaries, often to facilitate economic control over their resources, labour and markets. The territories conquered by the imperialist powers were eventually settled. During colonialism the European culture was promoted as superior to native culture.

History of Globalization 1870-1913- was the first wave of globalization. Cut short by World War I. League of Nations started during this time by Woodrow Wilson 1945-1973- renewed vigor towards the adoption of international organizations such as the UN, IMF and the World Bank (Bretton Woods Agr.) 1975 to present the third phase of globalization

Facilitators of Globalization World Bank International Monetary Fund World Trade Organization/ formerly the GATT Trans-national Corporations or Multi-national Corporations

Overview of IMF The IMF was created in 1945 for the purpose of providing loans to mainly western Europeans states that were facing balance of payment (b.o.p) problems. Overall mission – to oversee international monetary system; ensure exchange rate stability; to foster global monetary cooperation

IMF (cont’d) The work of the IMF is of three main types: Surveillance – involves the monitoring of economic and financial developments and provides policy advice aimed at crisis reduction. Provides temporary financing to countries with b.o.p problems and loans to support poverty reduction programmes. Provides countries with technical assistance and training in its areas of expertise.

Overview of World Bank The International Bank for Reconstruction and Development or World Bank is a sister organization to the IMF. It was established in 1947. The WB provides finance for projects to promote development and in recent times the emphasis has been on poverty reduction.

Policies of the WB Encouraging free market reform policies Liberalization of trade and capital markets

Policies of IMF and WB in the CAribbean Jamaica first country to embark on structural adjustment programme. Others – Barbados, Guyana, Dominica (1980s, 1990s) Conditionalities: :devaluation of currency in order to make exports cheaper on the world market and discourage imports by making them more expensive. : higher personal taxes – to increase government revenue and new forms of direct taxation

Conditionalities (cont’d) : lower taxes on businesses : reduce public spending on services – health care, education social welfare - to citizens : reduce the number of government employees – this would take the form of public sector retrenchment as a means of increasing efficiency and reducing public spending :privatise and or divest public and state-owned corporations

Impact of Policies Increase in poverty and unemployment Poor infra-structural development Marginalization of local businesses Increase in government debt

Overview of the World Trade Organization The WTO is an international organization that was established in 1995 as a replacement for the General Agreement on Tariffs and Trade (GATT). Its objectives are: to liberalise world trade and create an open global system; to supervise the settlement of commercial conflicts. Decision making is by consensus. Each member has one vote.

Principles of the Trading System WTO members are guided by 4 principles: Non-discrimination which covers two aspects: (a) Most Favoured Nation – when a member country extends special a benefit or preference to one trading partner, it is obligated to give the same MFN status to other WTO members. (b) National treatment – requires that local and foreign products, services as well as trademarks, copyrights and patents be treated equally (applies after same enters market).

Principles Of the WTO Liberalisation – reduction in tariffs and other barriers to trade. Predictability – potential trading partners and investors must know the terms of trade that exist in a country. WTO members are ‘bound’ not to place restrictions on non-resident/ non-national service providers. Trade rules cannot be changed to suit local conditions without first negotiating with partners and if needs be giving compensation in the event of loss of trade. Competitiveness WTO rules are dictated by open, fair and undistorted competition. The rules of non-discrimination are designed to secure fair competition in trade.

Benefits of WTO Membership The system allows disputes to be dealt with through the dispute settlement mechanisms in the agreement. Membership brings advantages of relatively unhindered trade in goods, services, technology and investment capital with other WTO members. WTO rulings in respect of trade in services and intellectual property rights are binding on all members and legally enforceable. Rulings may be appealed.

Criticisms of WTO WTO treaties are said to show a bias toward multinational corporations and wealthy nations. Small countries in the WTO do not have much influence. Countries that are not members of WTO are effectively under an embargo. The influential countries of the WTO focus on their own commercial interests and the needs of developing countries are perceived to be insignificant. The WTO’s promotion of free trade may result in uneployment and increased poverty.