Does globalization hinder or help wealth creation in development countries?

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Does the process of Globalization help or hinder wealth creation in developing countries?


Globalization is one of the most discussed topics in today`s world, and there are different opinions whether it helps or hinder wealth creation in developing countries. First, this essay will engage with defining the term globalization. After that,  the essay will focus on the positive and negative effects of globalization on developing countries, such as employment, economic recession, migration, domestic economy, available capital and financial sector development.  After that, the essay will try to represent a case, which will reinforce that at large, globalization has helped the wealth creation in developing countries.

To understand the effects of globalization on developing countries, it is important to define first globalization.  The term contains many different aspects, features and qualities. This term is generally used to define a mixture of cultural, social, economic and political changes that have created the world over the past few decades (Guttal, 2007). According to Rosenau (1997, p360) globalization is a “"a label that is presently in vogue to account for peoples, activities, norms, ideas, goods, services, and currencies that are decreasingly confined to a particular geographic space and its local and established practices".

Different people have contrary opinions about globalization. Some can see globalization as a favourable process, something that causes economic development in the world and it is fundamental. However, those who criticize globalization, state that it increases the number of unemployed people, cause inequality within nations, undermine living standards and hinder social development.

Globalization can affect the employment sector negatively in developing countries.  Some critics state that globalization cause higher level of  unemployment in developing countries. The invasion of foreign companies to developing countries boost the number of employees in many sectors, mainly for skilled workers. However, technological improvements, automation in manufacturing and agriculture, decrease the amount of unskilled labour needs, and it leads to rising unemployment in those sectors.  Nader (1993:334) and Brecher en Costello (1994) (in Scholte, 1997:334) clarify that globalization has caused a reduction in the trading capacity of an employee in relation to the van global company. This is due to the borders between countries which are still remaining, therefore the mobility of a worker becomes limited. Some case studies demonstrate a substantial distribution of the net impact on employment. In Uruguay, in a period when trade union activities were prohibited, the decline of employment was significant. During that period, decreasing the rate of protection within a sector by one percent caused an employment decrease between 0.4 and 0.5 percent within the same year.  The affection of employment became significantly lower when trade union activities were allowed (Rama, 1994).

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According to Mohr, the influx of foreign companies and the capital from outside of developing countries can increase the gap in wages between educated  and those who are not skilled workers.  In a long term, this education level will rise as developing countries are rising financially, but in the short term, it means that poor people will become poorer.

Economic recession occurs in developed countries can trigger adverse reaction across the globe as follows:

Decline in foreign direct investment, especially reduction in access of loans and the credits from banks. According to the UN, the foreign direct investment ...

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