Globalization Impact on Developing Economies

Description of the Research Topic

The topic for this research is centred on investigating the effects of globalization on developing economies. It emerges from conflicting views of experts, observers and pundits who disagree on the effects of economic integration on developing nations (Shahbaz et al. 2018; Raza & Karim 2018). While conventional wisdom dictates that globalisation is good for the economic growth of low-income countries, some experts have reported negative economic outcomes because of internationalisation (Shahbaz et al. 2018; Raza & Karim 2018). Some politicians have also joined the debate and openly opposed the liberalisation of national economies because of the fear that doing so would “take away” domestic jobs (Crawley, Swailes & Walsh 2013).

The conflicting views about globalisation have created mixed reviews about the impact of globalisation on developing economies. This confusion has also spilt into policy formulation processes and found its way in the management of modern western economies which are reconsidering protecting their local industries from global competition (Narayan 2017). Although this issue seems to be spreading further than previously envisioned, it is more profound in developing countries, which are vulnerable to economic upheavals and job losses (Boxall & Purcell 2011). The proposed research topic focuses on understanding the effects of globalisation on developing economies. The aims and objectives of the research appear below.

Aims and Objectives of the Research

Background and Issues Underlying the Research

The effects of globalisation on developing economies have been investigated from multiple perspectives. Some of the main areas of contention characterising opposing debates are centred on issues relating to job losses, the influx of cheap products (which could lead to the death of local industries), and the high cost of comparative or absolute advantage (Aswathappa 2013). The widening income gap between developing and developed nations is also another underlying issue motivating critics of global trade to oppose it (Coady & Dizioli 2018). Critics of globalisation have broadly based their objections on the impact of the trade on the planet as well as on human societies. To support their views, they have challenged the use of traditional metrics of economic development, such as Gross Domestic Product (GDP), and instead advocated for new frameworks for evaluating economic impacts, such as Gini Coefficient and the Happiness Index (Coady & Dizioli 2018).

A decrease in employment levels is also another underlying issue characterising this topic because many researchers have argued that globalisation comes with increased reliance on technology (Raza & Karim 2018). At the same time, economic integration has led to the influx of cheap imports and the decline of some industries in low-income countries (Coady & Dizioli 2018). Stemming from such concerns, foreign direct investment (FDI) flows, labour performance, balance of payment, and poverty reduction measures are some background issues underpinning the research topic. They also inform the formulation of the research questions and objectives as highlighted below.

Research Aim

To find out whether globalisation benefits developing countries

Research Objectives

1. To determine the effect of globalisation on the FDIs of developing nations?
2. To investigate the effects of globalisation on the labour performance of developing nations?
3. To find out how globalisation affects the balance of payment of developing nations?
4. To examine if globalisation is linked to poverty reduction in developing nations?

The Justification for the Research

The proposed topic is selected for review because the world is at a crossroad in terms of the direction for economic growth it chooses to take. For a long time, conventional wisdom has dictated that globalisation is a good addition to the international economic infrastructure. However, there is a push-back emerging from even the world’s leading economies (Siklos 2018). The recent “Brexit” vote and the pursuit of protectionist policies in America (under the Trump administration) demonstrate such concerns (Narayan 2017). Consequently, countries need a clearer direction regarding how to manage globalisation.

Business Disciplines and Academic Areas That Relate To the Research

The business disciplines and academic areas that relate to the research include economics, public policy development, environmentalism, technology and culture. These tenets of social, economic and political development have been cited most in studies that have investigated the impact of globalisation on emerging economies (Shahbaz et al. 2018).

Literature Review

Philosophical variations about people’s views on globalisation have led to a proliferation of different schools of thought on economic integration (Arora & Kalsie 2018). Proponents of internationalisation argue that globalisation is instrumental for the economic growth and well-being of human societies, while critics view some of its tenets as being detrimental to the development of certain sections of the human society (Singh & Singh 2018). The critics’ views propagate a narrative, which suggests that many governments are under neo-colonial pressures from MNCs and that they lack the independence to act alone. Much of this criticism has been emanating from the middle class (Singh & Singh 2018). Researchers have tried to explain why this demographic holds this sentiment by suggesting that the upward mobility of low-income workers is threatening their position in the world’s social strata (Singh & Singh 2018). Nonetheless, most of them agree that the problems associated with globalisation are unintended and they could lead to human alienation, increasing poverty levels, the breakdown of democracy and even the deterioration of the natural environment (Arora & Kalsie 2018).

Most academic publications that were released before 2005 reviewed globalisation negatively. In fact, a general survey of most articles published before 1998 showed that many researchers were of the view that globalisation had more negative consequences for human societies than positive ones (Arora & Kalsie 2018). According to Jafari et al. (2018), the number of negative publications about international trade increased by up to 10% between the year 1990 and 1999. Comparatively, a number of publications which have evaluated the views of Asians and Africans show that they tend to have a more favourable view of internationalisation compared to their European or American counterparts (Coulter 2018; Lin & Ye 2018). The highest positive ratings were reported in Africa, where studies showed that up to 70% of its inhabitants held a positive view of globalisation (Coulter 2018; Lin & Ye 2018). From the same study, it was found that 50% of them believed that international trade was moving rapidly, while 30% of them believed it was slow (Coulter 2018; Lin & Ye 2018).

Studies that have focused on Europe show that many people believe globalisation is also good for their economic progress (Bohle 2018). Furthermore, most of those sampled expressed their support for the European Union (EU) because they believed it would shield them from the negative consequences of the trade (Bohle 2018). Groups of people that hold a contrary opinion are mostly comprised of environmentalists, socialists, and sections of European nationalists. A study conducted by Hecht (2018) showed that many residents of the EU were not threatened by globalisation because the economic bloc had provided them with a stable economic foundation to chart their future economic direction, while a majority of them were unlikely to accept job cuts.

Countries which have a higher social spending are more likely to support globalisation than those that have a small budget for this purpose. For example, a Danish study revealed that up to 70% of its citizens supported international trade (Hecht 2018). This finding was largely associated with the high social budget that its citizens enjoy. In America, people’s opinion on internationalisation is polarised. This view could partly explain why opinion about global trade is divided. However, the divisions are not new. Narayan (2017) says that the polarised views regarding globalisation became stronger after the establishment of the World Trade Organisation (WTO) in 1995. At the time, people held strong views on both sides of the debate. There was even an anti-globalisation movement (at the time) that sought to discourage countries (especially low-income nations) from liberalising their economies for purposes of accommodating global trade (Hecht 2018; Ben-Naser, Bhattarai & Elheddad 2018).

The above findings were developed when educated people were deemed to be more likely to oppose the movement because they could understand the “bigger picture” of how global trade could revolutionise the international economic space (Boxall & Purcell 2015). Conversely, less educated ones were deemed to be the biggest supporters of the movement because they were likely to compete with immigrants and technology, which were direct products of globalisation.

Studies that have been conducted after the 2007 economic crisis show that educated people are also joining the less educated ones in opposing globalisation (Hecht 2018; Ben-Naser, Bhattarai & Elheddad 2018). However, the opinion of developing nations does not seem to have changed much because the majority of them have a positive perception of the trade (Narayan 2017). Many opposing views come from people who have environmental concerns about globalisation and nationalistic sentiments surrounding the same issue (Narayan 2017).

Theoretical Analysis

Theory of Liberalism: The economic theory of liberalism points out that international trade is an extension of modernisation. Its proponents say it emerges from a natural desire by people to improve their economic welfare and promote values that accentuate political liberty (Kukucha 2014). As such, connectivity is desired as the driving force for the acquisition of material wealth and the exercising of basic human freedoms (Kukucha 2014). Supporters of this view argue that these forces naturally outline the basic motivators underpinning globalisation and that naturally hold human societies together. These views emanate from different quarters of the academic field, including business studies, economics, law, and politics. Their positions emphasise the need to build or support international institutions that would enable globalisation to thrive (Shahbaz, Bhattacharya & Mahalik 2018).

The above-mentioned forces have yielded fruit in the global economic space because there is more integration, standardisation, and harmonisation in the global economy than ever before (Hoque 2000). Evidence of this fact could be seen in the development of international contracts because there is proof that many of them are being formulated using the same language and rights (Wilkinson & Johnstone 2016; Riley 2014). The greatest criticism levelled against proponents of the theory of liberalism is their continued neglect of the social forces that underpin their vision of an economically prosperous future.

Theory of Marxism: The Marxist school of thought is principally concerned with factors of production and how globalisation has influenced their performance (Callari 2016). More importantly, it discusses the principles of social exploitation, which is at the core of this paper’s argument because current debate on the effects of internationalisation on developing economies focuses on the potential for the economic trend to be exploitative. Marx anticipated the growth of capitalism because he argues that capital knows no boundaries (Salandy & Lester 2017). Accordingly, the theory of Marxism presents the view that globalisation happens because interconnectivity gives room for profit-making (Callari 2016). Stemming from this argument, it suggests that the legal and institutional infrastructures that are associated with economic integration serve the purpose of surplus accumulation (Kikuchi, Stachurski & Vachadze 2018). Comprehensively, as opposed to the theory of liberalism, Marxism is concerned with the negative effects of globalisation because the latter makes up a legitimating ideology of exploitative globalisation.

Summary

From the onset of this study, it was established that topic for this research is centred on investigating the effects of globalisation on developing economies. The interest emanated from conflicting views of experts, observers and pundits who disagree on the effects of economic integration on developing nations. Based on a review of studies which have explored the research issue, the main research gap that emerges from this literature review is the lack of recent investigations on whether globalisation continues to have a positive impact on developing countries, or not. Furthermore, most studies that have alluded to a positive or negative impact of globalisation on developing countries have failed to consider the influence of changing political, economic, and social dynamics on their findings. Therefore, there is a need to undertake a more recent evaluation of the research topic to establish whether international trade still benefits developing economies, or not.

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