GLOBALIZATION AND DEVELOPMENT

Globalization refers to the increasing integration of national economies in

terms of trade, financial flows, ideas, information and technology. Developing
economies may gain through foreign direct investment ("FDI"), the benefits
of trade or technology transfer.
Globalisation has increased the ratio of trade to GDP for many countries and
caused a sustained increase in capital flows between counties and an
increase in trade in goods and services.
Background
The term "globalisation" first became widely used in the 1980s, but the
concept stretches back decades, perhaps even centuries, if you count the
trading empires built by Spain, Portugal, Britain, and Holland.
The strategy of Western states to build and strengthen international ties in
the aftermath of World War II laid the groundwork for today's globalisation.
It has brought diminishing national borders and the fusing of individual
national markets. The fall of protectionist barriers has stimulated free
movement of capital and paved the way for companies to set up several
bases around the world.
The rise of the internet and recent advances in telecommunications has
boosted the already surging train.
Problems with globalisation
A strong coalition of environmentalists, anti-poverty campaigners, trade
unionists and anti-capitalist groups see the growth of global companies as
raising more problems than it solves.
Globalisation may result in the following problems:
Joining the world economy means LDC's are exposed to external economic
forces over which they have little control,
Reduced national sovereignty making macroeconomic management by
domestic
governments
difficult

A states ability to raise corporation taxation is declining. Transnational

Companies ("TNC's") may relocate if taxed to highly and use transfer price to
avoid paying domestic taxes.
Globalisation may be strengthening the position of the developed economies
that are better able to take advantage of free trade.