Philip McMichael’s Views on Globalization as a Way to Restructure Developing Countries and Their Economies International Relation Paper

Philip McMichael’s Views on Globalization as a Way to Restructure Developing Countries and Their Economies

According to Philip McMichael, globalization is a project of global economics management that is controlled by powerful elite financiers, corporate leaders, national and international bureaucrats to restructure developing countries and their economies. In my opinion, I would agree with Philip because globalization in the IPE has helped to promote social and economic development in developing countries. According to Philip, globalization reduces the gap between countries and increase international relations with an aim of promoting economic development in the developing countries.[1]

Globalization is the term that refers to the interaction between people, businesses, organisations and governments of different countries.[2] International trade, infrastructure development and advancement in information technology aid the process of globalization. Although globalization is not a new trend in the international political economy, it has gained much focus over the past few decades. Today, there has been an increase in international trade as people and business are trading their goods and services across the globe. Additionally, there is free movement of labour across the globe, and this has accelerated the rate of globalization.[3] The current infrastructure development has also been a key driver of globalization. Infrastructure development has enhanced movement of the people as well as transportation of goods and services around the world. There has been the advanced mode of transport over the sea, air, rail and road that has increased access to the global market. The advancement in technology has also accelerated the rate of globalization. Discovery of the internet has enhanced communication between people in different nations. Most people are using their mobile phones and computers to conduct business through the Internet. Technology also facilitates money transfer services that enable payment of goods and services from different countries. As a result, there has been increased globalization in the recent years.[4]

Globalization enables various countries to exchange or trade their ideas, resources, technology, culture and political ideologies globally. As a result, there is increased the market for goods and services as well as increase the supply of resources such as raw materials and labour worldwide. Different countries have different resources and production capabilities and as a result globalization helps different countries to obtain resources they don’t have and capabilities from other countries. Further, countries are also able to exchange culture and political ideologies through interactions resulting from globalization[5].

Developed countries have emerged as the major beneficiary of globalization. Developed countries and international organisations see globalization as the link between developing countries and developed country. Argument by Philip support the notion that globalization emerged as an effort to help the developing countries to develop their economies. Thus, globalization heavily relies on developed countries to promote the economic development of the developing countries. To support his argument globalization has helped to create a stable supply of cash to developing countries.[6] Globalization creates access to new markets for developing countries to trade their goods and services.[7] Most of the developing countries in the world rely on agriculture for economic growth. For many countries, agriculture produces more than half of the country’s output. For example, in Egypt agriculture produce about 68% of the GDP. [8] However, the main challenge that faces these developing countries is a market for their produce. The amount produced is usually more than the country can consume and lack external market can lead to wastage.[9]

Globalization has enabled developing countries to sell their products internationally hence increasing the market for their produce. Developed countries are the major consumer of the agricultural products produced in the developing countries.[10] Thus, they provide a big market for developing countries. One of the advantages of developing countries exporting their produce to the international market is that they get better prices that can help to increase the income of farmers. Thus, there is increased economic growth as well as improved standards of living in developing countries.

Developing countries are also full of underutilized resources such as minerals. For example, most of the developing countries have mineral resources such as oil that is a variable resource in the world. Globalization has opened ways to which developing countries can benefit from the resources. Globalization enables developing countries to export these minerals to developing countries that offer a big market for the resources. For example, developing countries are the major consumers of oil and most of them do not have these resources. Thus, developing countries with oil get huge income from exporting oil to developing countries hence developing their economy.

Developing countries also have extensive human resources that can be exported around the world to benefit the country. Globalization has enabled free movement of labour, and most people are migrating to developed countries to look for well-paying jobs. When they get jobs, they usually help their family back home by sending them money in the form of remittances.[11] This platform although relies on the developed nations supply and demand chain, however allows for the migration of people with particular skills and therefore a new revived source of income. As a result of the transferring of money to their home countries, it has helped increase the living standards of the low-income families. Most of the money is invested in health and education that are the pillars of economic development. A study by Bettin, Presbitero, and Spatafora, (2014) indicated that remittances contribute to a large portion of GDP in developing countries hence promoting economic development.[12]

In the economic perspective, remittances change the spending habits in developing countries. There is usually increased household spending that lead to the high aggregate demand of goods and services.[13] High aggregate demand often trigger and production leading to the creation of jobs on the production side of the economy. This increases the output in the economy as well as reduces the unemployment rate. Remittances also help low-income families from developing countries to establish small businesses to sustain their life. The growth of small business has resulted in significant economic growth in these countries.[14]

Globalization has also seen developed countries establishing business and industries in developing countries. The major drive that has resulted in most companies opening industries overseas is to be close to the supply of raw materials, to get cheap labour and to get close to the market. Most developing countries particularly the African continent are vivid example of this changing terrain where  foreigners drive the economic marker through foreign direct investments, merger, acquisition, and partnership own most of the big businesses.[15] The immediate effect of these businesses and industries are in providing an exponential job market hence promoting to economic development of the developing nations. Most of the workers in the international companies in foreign countries are locals as most companies are outsourcing and, as a result, they earn income which help in promoting their living standards. Additionally, the business also contributes to economic development by paying taxes to the government in respective countries. Research has shown that foreign companies usually pay huge taxes to the host country than local businesses hence they have a great impact on the country.[16]

Foreign businesses are also required by laws to engage in corporate social responsibility. As a result, international businesses in overseas countries engaged in activities that improve the living standards of the poor in respective developing countries. Areas that most foreign businesses have shown concern include increasing access to social amenities such as schools, hospitals, electric supply and water supply. They have also participated in infrastructure development such as roads to increase their access to raw materials leading to developments in developing countries.[17]

Globalization has also helped developing countries in technological innovations. Most of the technological innovations are developed in the developed countries and are rarely available in developing countries. However, globalization has enabled the developed countries to share their innovation with third world countries.[18] For example, most of the technological devices, such computers and mobile phones are produced by developed countries but globalization has enabled most people around the world to access them. As a result, the technology has promoted businesses by enhancing communication, reducing the cost of operation, and increasing efficiency. The growth of the business has been a major contributor to social and economic development in developing countries.

Globalization has also helped shape the new business regulations in developing countries that enhance economic growth. To participate in the global trade, a country is required to restructure its rules and regulation that affect business. Such laws and regulation include regulation of import and export of goods and services, tax regulations, and licensing among many others.[19] The new regulations serve to the advantages of local businesses than for international businesses operating in the country. Hence, most of the people from developing countries are engaging in business. The international relations has also encouraged Free Trade Agreements that focus on helping farmers from developing countries get fair market for their produce. For example, Australia recently signed the Trans-Pacific Trade Agreement to enable famers to market their produce across the pacific regions freely. In most developing country agriculture is the backbone of the economy hence promoting agriculture through Free Trade Agreement promote economic growth. For example, Egypt is relying on agriculture to promote national development hence FTA helps famers to get market for their produce.[20] The international businesses hosted in the country also act as a baseline for competition and often local business copy their strategies leading to their success thus globalisation through foreign investment in developing countries enhance their economic viability

Globalization has attempted to bridge the gap between the rich and the poor in the world. In reality, there is a huge gap between the poor and the rich in the world. The gap can be depicted by the difference between the developed countries and developing countries. The economy of the developed countries is extremely high compared to economic development in developing countries, which is extremely low.[21] The global political economy has helped to bridge this gap by emphasizing support for developing economies. Globalization enables the international organisation to finance various projects in the developing countries that help to improve the living standards of the poor. Some of the projects include financing education and health programs in the developing countries as well as infrastructure development.[22]

Another way that globalisation has emerged to be material to the developed world is through shaping political systems around the world. The interaction between different nations has influenced the political systems of various countries. Globalization allows the exchange of political ideologies and developing countries often copy political system of the developed economies to ensure efficiency of their government. Initially, some countries, especially in the developing economies, had a poor political structure that hindered economic development. The involvement in international relations and globalization has contributed to changes in the political structures, and this has contributed to significant economic growth in the respective countries. Globalization has proved that reforms in political dynamics of developing countries can unleash the social and economic potentials of these economies. The international organisation has also influence politics in most developing countries as they try to open a new market for goods and services. Involvement of international organisations has helped to set political structures that ensure equity among citizens.[23]

Globalization has also helped in reducing social inequalities around the world. In many countries especially in the developing world, there are high social inequalities where the rich have been oppressing the poor. It is evident that the voice of the poor has been highly neglected in several countries such as some countries in Africa, some middle-eastern countries and many in the Pacific.[24]  Most of the laws and legislation only favour the few individuals in developing countries. However, the involvement globalization has helped to raise the voice of the poor. International organisations are influencing domestic legislation that support the poor. Various global organisations have also initiated projects that aim at helping the poor in developing countries. Some international bodies such as World Bank and International Monetary Fund (IMF) have also been financing developing countries to promote their economic growth. This has been achieved by funding infrastructure developments, education, and health in developing countries.[25] Globalization has also enabled people around the word to access better resources. Prior to globalization, most of the people in developing countries did not have access to some services such as better education and health. Accepting the fact that there are still disparity between the developed and the developing world, however it can be argued that globalization has enabled them to access these resources from other countries. For example, students from developing countries often travel abroad to seek better and quality education. Additionally, patients from developing countries seek quality health care from developing countries with better technology.[26]

Globalization has also helped to promote peace in most parts of the world especially in developing countries. Before the emergence of globalization, there were several conflicts around the world both internal and external especially in South and East Asia Most developing countries experienced civil wars between communities that hindered political and economic development. However, globalization opened these countries to the international community that helped to resolve the conflicts. One such example is Afghanistan, which suffered from extremism and sectarianism that gave rise to a non-ending civil outbreak. Although the results are not drastically changed[27] due to globalisation, it is argued that the doors to diplomacy were opened as a result of an interconnected, globalised world.  Most of the developed economies engaged in resolving conflicts in developing countries to open a new industrial hub in these countries. On the other hand, there were several conflicts among different nations around the world. Globalization triggered international organisations to end this war to enhance international trade. Regional trade organisations require their members to agree on treaties to maintain peace to create a favourable environment for international trade. Additionally, in the case of war or conflicts international bodies usually helps in maintaining peace. Today, most developing countries are at peace, and they can trade freely in international trade hence promoting economic development.

Although Philips argued that globalization was aimed at bringing political and economic development in the developing countries, opponents perceive globalization as a form of exploiting the poor. Most developed countries are exploiting workers in developing countries by overworking them and paying low wages.[28] The main driver of international companies shifting their operations to developing countries is to benefit from cheap labour offered by the local citizens. In developing countries, majority of the citizens are poor and struggle to survive hence they are ready to work under any circumstance to afford basic needs. International companies take this as an advantage and give them low wages and unfavourable working conditions. As a result of low income, the living standards of locals in developing countries remain poor.

It has also been cited that setting large multinational companies in developing countries lead to unfair competition in the market[29]. For example, in China apple one of the giant technological companies has been exploiting Chinese workers in their factory by overworking them and paying low wages.  Large companies usually take advantage of mass production and economies of scale in the production of goods and services. They also take advantage of advanced technology to improve production efficiency. As a result, they experience the low cost of operation in the production of their goods leading to the low price of goods. Low priced goods in the market bring unfair competition to the local business that usually struggle due to the high cost of operation. This has slowed the growth of small and medium businesses that are the backbone of economic growth in developing countries.[30]

It has also been noted that increased globalization has contributed to environmental damages and reliance on non-renewable sources of energy in developing countries. In most developing countries, there are limited laws and regulations to protect the environment such as carbon emission regulations and dumping of inorganic matters. As a result, large multi-national corporations often release their wastes into the atmosphere and water bodies without minding their impacts. As Economic and Social Council of the United Nation (ECOSOC) predicts there  has increased pollution in developing countries that are affecting the lives of the citizens[31]. Most of the big industries that pollute the environment are from developed economies operating in developing countries. Thus, opponents of globalization argue that globalization aimed at exploiting the developed economies.

 International organisations are also influencing the political in developing the world by pressuring enactment of legislations that favour foreign multi-national corporations. For example, international organisation and developed economies pressure developing countries to enter into trade agreements and treaties that enable free movement of goods and services. The free movement of goods enables foreign companies to export their low priced product in the market that result to slow economic growth in developing countries.[32]

Globalization has also been associated with various negative macroeconomic impacts such as inflation, low exchange rates, and high-interest rates in developing countries.[33] Globalization often results to increase in money supply in developing countries that lead to a rise in demand for goods and services. The high demand pushes the prices up resulting in inflation. Additionally, globalization affects the exchange rate of developing countries negatives. Most of the developing countries import more than they export leading to trade imbalance.[34] High trade imbalance has a negative effect on the exchange rate. Globalization also leads to increase in interest rate as the central banks in developing countries try to control the money supply in the country. High-interest rate slows economic growth due to the high cost of borrowing that discourages investors.[35]

Conclusion

I agree with Philip that globalisation is a global project by financiers, corporate leaders and national and international bureaucrats to restructure developing countries and their economies. To support the argument, globalization has opened developing countries to the global market and enabled them to participate in international trade. As a result, these countries can sell their products and services, resources, and labour that increases the GDP of the country. Conversely, developing economies have also benefited from technology, increased supply of goods and services, infrastructure development and increased employment from globalization. Globalization has also led to equality and promoted peace in the developing world.[36] However, globalization also has some limitations in developing countries. It has brought unfair competition in the market, led to degradation of the environment and negative influence on the political system

Bibliography

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[1] Lawton, Thomas C., James N. Rosenau, and Amy Verdun. Strange power: Shaping the parameters of international relations and international political economy. Aldershot/Burlington, Ashgate, 2000.

[2] Swank, Duane. “Globalization, domestic politics, and welfare state retrenchment in capitalist democracies.” Social Policy and Society 4, no. 02 (2005): 183-195.

[3] Ibid

[4] Paul, Krogman. “The Return of Depression Economics and the Crisis of 2008.” (2009): 978-0.

Strange, Susan. “International economics and international relations: a case of mutual neglect.” International Affairs (Royal Institute of International Affairs 1944-) (1970): 304-315.

[5] Baylis, John, Steve Smith, and Patricia Owens. The globalization of world politics: an introduction to international relations. Oxford University Press, 2013.

[6] Ibid., 2

[7] Ibid., 3

[8] Gollin, Douglas, David Lagakos, and Michael E. Waugh. “Agricultural productivity differences across countries.” The American Economic Review 104, no. 5 (2014): 165-170.

[9] Ibid., 7

[10] Paul, Krogman. “The Return of Depression Economics and the Crisis of 2008.” (2009): 978-0.

Strange, Susan. “International economics and international relations: a case of mutual neglect.” International Affairs (Royal Institute of International Affairs 1944-) (1970): 304-315.

[11] Ibid. 6

[12] Bettin, G., Presbitero, A. F., & Spatafora, N. (2014). Remittances and vulnerability in developing countries. World Bank Policy Research Working Paper, (6812).

[13] Ibid., 11

[14] Baylis, John, Steve Smith, and Patricia Owens. The globalization of world politics: an introduction to international relations. Oxford University Press, 2013.

[15] Murphy, Craig N. “Global governance: poorly done and poorly understood.” International Affairs 76, no. 4 Ottaway, M. (2001). Corporatism goes global: International organisations, nongovernmental organisation networks, and transnational business. Global Governance, 265-292.

[16] Ibid., 6

[17] Cammack, Paul. “The governance of global capitalism: a new materialist perspective.” Historical Materialism 11, no. 2 (2003): 37-59.

[18] Ibid., 8

[19] Murphy, Craig N. “Global governance: poorly done and poorly understood.” International Affairs 76, no. 4 Ottaway, M. (2001). Corporatism goes global: International organizations, nongovernmental organization networks, and transnational business. Global Governance, 265-292.

[20] Ibid., 8

[21] Ibid., 9

[22] Cerny, Philip G. “Paradoxes of the competition state: the dynamics of political globalization.” Government and opposition 32, no. 02 (1997): 251-274.

[23] Ibid., 12

[24] Ibid., 5

[25] Baylis, John, Steve Smith, and Patricia Owens. The globalization of world politics: an introduction to international relations. Oxford University Press, 2013.

[26] Denemark, Robert A., and Robert O’Brien. “Contesting the canon: international political economy at UK and US universities.” Review of International Political Economy 4, no. 1 (1997): 214-238.

[27] Ahmad, N., & French, J. J. (2014). Evidence on the Linkages between Remittances and the Macroeconomy. The Journal of Economics, 40(1), 31-46.

[28] Balli, F., & Rana, F. (2015). Determinants of risk sharing through remittances. Journal of Banking & Finance, 55, 107-116.

[29] Sandoval, M. (2013). Foxconned Labour as the Dark Side of the Information Age: Working Conditions at Apple’s Contract Manufacturers in China. Triple C: Communication, Capitalism & Critique. Open Access Journal for a Global Sustainable Information Society, 11(2), 318-347.

[30] Gilpin, R. (2001). Global political economy understanding the international economic order ‘Princeton University Press. Princeton NJ.

[31] Ibid., 27

[32] Ibid., 13

[33] Ibid., 17

[34] Ibid., 3

[35] Higgott, Richard. “Economics, politics and (international) political economy: the need for a balanced diet in an era of globalization.” New Political Economy 4, no. 1 (1999): 23-36.

[36] Kaplinsky, Raphael. “Is globalization all it is cracked up to be?.” Review of International Political Economy 8, no. 1 (2001): 45-65.