User:MILAN KARKI

GLOBALIZATION; COST BENEFITS AND CONCERNS.

The world economic order is in the process of rapid change, the world has now turned to a borderless global community, and we are at present in transient period of rapid globalization. Globalization means “the growing economic interdependence of countries through, increased volume and variety of cross-border transactions in goods and service, freer international capital flows, and, widespread diffusion of technology (IMF, World Economic Outlook, May, 1997). As the process gets along its way we shall know about the pros and cons. However we can prematurely speculate about the benefit it brings to global economic order. No matter it may help in boosting up world economy however the cost at which we shall be benefited is still debatable. Will it give more benefits than the cost we have to pay for it? It still remains to be answerable. While availing the countries with economic benefits, globalization (during the process of integration) also poses lots of challenges to the members during the process of integration. The possibility of movement toward competitive globalization in which the inward looking regionalization may lead to the discrimination among nonmembers and may encourage the formation of other regional groups (hence reviving the possibility of economic clash leading to other sorts of conflicts). We may often be troubled by domino effect, that is, when the crisis occurs in one nation it will affect the entire region. The Asian financial crisis in 1997 impeded the economic performance of most of the members in the region, the recurrence of which can be avoided by economic cooperation and structural reformation. The reformation requirements may mismatch the existing ones which is a pressure on the recipients. In addition to the effort of seeking more appropriate structural reform for specific countries, is strong demand for a commitment towards the cooperation is lacking. Another hindrance we have to overcome is the resistance from vested interest group at home. (As they benefit from the prevalent economic system; switching on to free trade will take them to worse conditions, which may not be easily accepted by them. To overcome this barricade, the institution present therein has to take measures cautiously enough to guarantee the cohesion among prevailing economic institutions. The level of economic performance in ASEAN+ 3 reveals a big gap between the rich and poor members which is finally not friendlier to poor members and hence they will lose more than they gain during the integration because of their low competitive strength. Therefore a persistent request for protection or some sort of reservations against other group members emerges. The better choice should be promoting close cooperation among nation to take maximum benefit from the dynamic growth of its member rather than the rich member concentrating on self defensive economy. Furthermore, increasing volume and variety of cross-border transactions in goods and services is achieved through abolition or reduction of tariffs or other trade barriers. By dropping those barriers bilaterally or multilaterally, domestic markets can obtain access to foreign markets, leading to profits for both domestic consumers and producers. East Asia is a good example to see how states which are interrelated boost their economic growth in the process of Globalization.

Although the main reasons for rapid growth in the region are their policies such as trade orientation or Industrial policies, the fact that East Asian countries have been interdependent on each East Asian country can not be ignored since they succeeded in rapid economic growth through ripple effect. Besides, countries which are short of natural resources such as Japan may have easy access to resource market as necessary. For example because of interdependence oil producers and those lacking them are benefited (a mutually beneficial relationship). In addition to that, nation states can expect rapid spread of its technologies. States which have access to global market can obtain products which they cannot produce on their own. Moreover, because of developing country’s cheaper labor cost, private companies in advanced countries tend to build their factories in developing countries; as a result, there is a chance of technology transfer to developing countries. Globalization and our concerns; the first concern deals with the effects of globalization on equitable distribution of income in a particular country (society). Globalization may prove to be beneficial to only a particular sector of the economy that can keep abreast in competition. In the absence of effective safety nets, some sectors may be withering or wiped out if not sooner a little later because they do not have the resources and technology to remain competitive. Though the job of the government is to provide safety nets; retraining of displaced workers, however it may not have adequate resources or technology know-how to protect the welfare of the affected workers. The aggregate income of the country may increase as a result of the globalization but as to whether it has decreased the gap between the rich and the poor remains to be seen. In countries where economic disparity is very severe, the fewer rich may receive all or most benefit from globalization. This gap may breed unrest and create a civil strife which may have serious repercussions in regional stability. Secondly the effectiveness of globalization in overcoming the resistance of vested interests groups, who shall be loosing their benefits due to free trade needs testing. Hence the feasibility of globalization process is at stake. Each country acts to protect its own self interest (Nationalistic economy). Since the country’s government may be politically grateful to special interest groups, it may not be able to remove the inefficient trade protection to these groups. This has been shown by the current row in the WTO between the rich and poor countries. The rich countries do not want to remove subsidies and other trade protection to its agricultural sector while the poor countries cannot go on with the tough competitive market and finally gets bankrupt. The final concern has to do with the limitations in the institutional capabilities of a particular country to constructively participate in the globalization efforts. Some countries do not have perfect market systems to properly fix themselves in the globalization process, furthermore political and social limitations present therein may reduce their ability to gain benefits. One example of these limitations is the weak if not absent forward and backward integration in the economic sectors of the country. Another example is the structure and quality of governance where there is an embedded culture of corruption and lack of accountability built in the system. Other examples are social and ethnic divisions and the absence of strong adherence to the rule of law which could produce civil strife and create instability in the political and economic situation of the country. While some of these limitations are present only in the country concerned, it has an overreaching implication on the health and stability of the regional arrangements.