Nowadays world economic development has become more and more dependent on the relationship of each country. They interact and cooperate deeply with each others for mutual benefits to develop their national economy .This trend profoundly affecting world development is globalization which will bring unpredictable results to many aspects of all countries. In this essay both the positive and negative effects of globalization in most important areas will be discussed. In the second section to what extent they are beneficial to national finance will be considered, more specifically which play an important role in national economics.
Globalization is widely accepted as a significant benefit to world economic development. When countries open their doors to world trade, they will become wealthier. due to globalization, the world’s population living under one dollar per day has been reduced from about 85% in 1820 to 20% nowadays.( Hon. Alexander Downer,2006) ‘72 developing countries found that since 1980, the “globalisers” – those that increased their ratio of trade to GDP – grew almost four times faster than non-globalisers’. (World Banks study, 2002) multinational companies also benefit from it, because they establish new plants in some developing counties where labour sources are much cheaper. Meantime they can sell products to the local market avoiding political restrictions and reduce the cost of tariff tax. Local people would get more working opportunities and improve their skills which will promote countries development. However ,due to the outsourcing of multinational companies western are anxiety about their jobs and wage.( Steve Schifferes,2007) Moreover some people believe that increase of wealthy within country are inequality, only the minority of people benefit from it actually .Between countries, poor counties could only supply farm products and raw materials the prices of which are controlled by developed countries.
It’s generally agreed that this is a good chance for every country to show their unique culture feature to the rest of the world. Travel around the world has increased dramatically recently contributed to internal travelling service development. People can experience variety culture around the world. For many countries their brilliant civilization can be showcased outside and may spread worldwide. Nevertheless some people argue that the world culture has been influenced only by super powered country. Fast food is everywhere, famous brand such as Nike are people’s favourites. This is a trend of simplification.
Some people consider there will be an unfortunately future of global environment due to globalization. Due to industrialization global warming has become more serious and no effective solution has been carried out. If this situation continues, the glaciers will melt more rapidly and the increase of sea level will threaten many countries with low altitude. Deforestation due to industrialization is also a serious problem which will affect profoundly the global climate and future life of local people. According to Ron Nielsen, roughly half of the mature tropical forests which covered the earth before have been cut off. ‘West Africa, Madagascar, Southeast Asia and many other regions have experienced lower revenue because of declining timber harvests’.
A very important area needed to be considered seriously is finance which plays an important role in national economics.
It’s become more and more convenient for people to do international business due to the development of the international finance system. When the information technologies were introduced and international communication standards among international banks are established, the international clearance system permits international company and businessman to transact money immediately. ‘Banks and private investors now hold trillions of assets invested overseas since the liberalisation of world capital markets in the l980s.’(BBC) Conversely, it is also convenient and free for speculator to bet in the international capital market. Normally hot money will massively flow into some country where interest rate is much higher than other countries, and flow out` when it drop down. This could affect national economic stability especially for the third worlds sometime, could be a disaster, because their finance systems are not healthy enough. Asian finance crisis between 1997 and 1998 is a good example. According to IMF report the exchange rate has reduced 38%,81%,50% separately in Thailand Indonesia and South Korea between July 1997 and January 1998.Stock market has also dropped down dramatically in Asian area. Dick K. Nanto maintained that this problems are caused by a shortage foreign exchange. ‘Inadequately developed financial sectors and mechanisms for allocating capital’ in Asian area is also an important reason. (Dick K. Nanto,1998)
When a country become a member of WTO, it means the country could enjoin the mutual benefits with other members .the trade between each other will be more freely against high tariff tax and none tariff tax barrier. This would promote world economic development. In finance area international bank could establish branches world widely and share the market of local area. The local capital market will become more completive. However, to participate in WTO many international regulations must be obeyed and local politics restriction against WTO must be cancelled. As a result some powerful countries will have the majority benefit. Many local banks under heavy completive pressure may go to bankrupt due to their out time management and technology .If this situation happen dramatically and national finance is dominated by foreign bank; it will be fatal for the whole country.
To sum up, globalization has both advantage and disadvantage in many areas for countries development. In my opinion, the advantages out weight of the disadvantages, especially in the economic area. It definitely pose a threat to the national finance stability of poor countries, however if the procedure is implemented smoothly, they will benefit much more.
Word count: 943
Reference
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Steve Schifferes, 2007 Globalisation shakes the world,
Hon. Alexander Downer, 2006, Globalization: a force for good,
Ron Nielsen, 2006, The Little Green Handbook: Seven Trends Shaping the Future of Our Planet,
Dick K. Nanto,1998,the 1997-98 Asian financial crisis,
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