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Mar. 13, 2007 Trade allows people to make individual decisions concerning their own well-being. This requires a different approach to the traditional beliefs that the governments are best qualified to distribute goods to its people. In the 1980s, the laissez-faire capitalist policies of Ronald Reagan and Margaret Thatcher broke down trade barriers and business regulations as privatization and trade liberalization was seen as a more favorable method to distribute benefits and resources to the public, resulting in a more weakened public sector (Wikipedia, 2005). Many anti-globalists would like to see governments take a more active role in this distribution process. As multinational corporations control more resources and the means to distribute them, they have more power when negotiating trading terms with poor countries. The poorest of the least-developed countries' problem is not that they are being impoverished by globalization, but that they are in danger of being largely excluded from it. Of the impoverished countries, 0.4 % of these countries had declining trade with international partners in 1997, down by half from 1980. Their access to foreign private investment remains negligible (PREM, 2000). These nations have limited the outside world's access to their nation, and in doing so, have limited their own growth. There are four aspects of globalization that should help poorer countries become more self-sufficient. These include trade, capital movements, movements of people, spread of knowledge and technology (IMF, 2000). Trade allows individuals to exchange labor, goods, land and technology and is more efficient at putting these items into more peoples control rather than trying to control these from a single point like the government or aid organizations. In developing countries, as a whole, trade has increased from 19% in 1971 to 29% in 1999, but not all countries have benefited equally. Countries in Southeast Asia, China and India are on track to becoming economic powerhouses as they export primarily manufactured goods and have opened their society to allow international trade. Then there are others, mainly in Africa, who primarily exports raw materials and food, and trade has not fared as well (IMF, 2000). The agricultural subsidies of the rich countries inundate their markets with artificially low cost agricultural products, as a result ruining domestic agricultural industries (Newsbatch, 2005). Further observation has also shown that African countries are more dictatorial and aid packages have remained prevalent. Capital movements are the movement of financial assets across international borders. Since the 1980s, trade has opened up, allowing business investment to replace foreign aid as the single most important category to help transition developing economies to market economies. The World Bank (Appendix 4) shows the net private flows to developing nations are at higher levels than net official flow consistently from 1992 through 2002, the period of the observed data. Not only did net private flows to developing nations outpace official net flows, they did so by a significant amount. By the end of the 1990s, private investment exceeded net official assistance by seven times (World Bank, 2004). Private investment is investment that is made by private companies to developing countries that does not require direct repayments from the country itself. The government does not control private investment; but the government does benefit indirectly. Multinational corporations build factories and hire workers, and usually pay them above local wages, yet below the wages of their home country. Local governments can then collect more revenue from the increased tax base from the workers and the industry. Workers will move to where the jobs are located. This means that unskilled workers will move to where more unskilled labor is required; or skilled workers moving to where more skilled labor is required. Wages communicate the demand for the labor that is required by each country. Most migration is between developing nations, but some migration does occur between developed nations and developing nations and in this process, skills can be transferred (IMF, 2000). If an unskilled, labor abundant nation wants to develop a more skilled work force; they should want to engage in trade with a country that is more abundant in skilled labor. Nations that participate in trade will have higher wages than those who do not. There is a direct relationship (Appendix 1) between the openness to trade and per capita income. In a more open society, companies compete against other companies, and provide better opportunities for qualified individuals, offering higher wages for the required labor. The poor nation will also benefit when workers go abroad and can earn higher wages in another country and send money back home, which will also pump money into the economy of the poor nation. Technology is spread by business investment as new equipment and technology are installed in the developing nations. Knowledge is also shared regarding production methods, management techniques, export markets and economic policies. These are available at low cost, and it represents highly valuable resources for the developing countries (IMF, 2005). Technology is expensive and is developed by richer nations and then put in poorer nations for production. The poorer nation can benefit from the expensive technology as a rich nation generates the new technology, a multinational corporation invests in the production, and the unskilled labor of the poor country will have jobs that pay a better wage. Nations that embrace these policies will benefit from trade with international markets. Countries, whose economies have flourished, have learned to let their people be responsible for their own economic welfare. These governments have privatized many of their industries allowing them movement in and out of countries as they search for economic benefits. In doing so, these countries are able to share capital, people and technology that can benefit both countries without engaging in direct unilateral gift exchanges, in the form of aid. Bibliography IMF staff (April 2000), Globalization: threat or opportunity? International monetary fund. Retrieved from October 15, 2005 from here. PREM economic policy group and development economics group. April 2000. Retrieved September 22, 2005 from here. World bank staff (2004). Globalization: foreign investment and foreign aid. World bank. Retrieved October 15, 2005 from here. ------------ About the author: I [M. Stephen Lucas] live in Houston, Texas with my wife of ten years and two children. I recieved my MBA from the University of Houston and consider myself a social philosopher. I think any can comment on social issues, but I like to provide a value added service by providing econometric facts and rely less on anecdotal evidence. Thunder Wolf Email: twolf@myweb.net Comment on this article here! ------------ All articles are EXCLUSIVE to Useless-Knowledge.com. Please link to this article rather than copying and pasting it onto your site (which would be unauthorized and illegal). |
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