Weakenesses of Globalisation

Many often view globalisation as a contentious issue; nonetheless, one cannot ignore the vast impact it has caused on a global scale. The phenomenon has been defined as "the process through which an increasingly free flow of ideas, people, goods, services, and capital leads to the integration of economies and societies" (Definition - imf.org). Throughout the 20th Century, scholars have intensely debated whether this integration of economies has truly benefited all parties.

The advocates of globalisation praise the nature of collaboration between industries and countries. By opening the world to free trade, the concept of competition should prevail and ultimately benefit consumers worldwide. Through free trade, goods and services can be produced more efficiently, to a higher standard and at a more cost effective price. Moreover, since firms compete in a global marketplace, the degree of innovation will also increase significantly within industries. Within the space of two decades mobile phones have gone from clumsy and expensive toys to highly capable and affordable necessity; globalisation has pushed the frontier of innovation and cost effectiveness (Mobile Phones - atechnologysociety.co.uk). The nature of globalisation creates Foreign Direct Investment (FDI). Advocates of Globalisation argue that FDI is a central pillar to the rise of Less Economically Developed Countries (LEDC). This rise in capital should increase the chances of people having better living standards, improve human capital and eventually help people to succeed economically.

However, one can argue that at present this theoretical fantasy is a far cry from reality. Economists, such as Stiglitz, highlight the inconsistencies within the current framework of globalisation. In his film Around the World, Stiglitz speaks of the rigging of the free market by international institutions such as the World Trade Organisation (WTO) and International Monetary Fund (IMF). Stiglitz criticises the policy makers of these institutions as they are shrouded in neo-liberal economic ideology that benefits rich countries; now known as the Washington consensus (Washington Consensus - who.int). He believes that the Washington consensus prevents the true nature of the free market from acting and consequently criticises WTO and IMF policies as "incompetent, disloyal and dishonest" (Around the World - stiglitz-thefilm.com). The film interviews the Indian Minister for Trade who comments on the hypocrisy of Western governments and protectionist policies. Agriculture is affected disproportionally since "the Indian farmer does not compete with a US farmer but the US government" (Around the World - stiglitz-thefilm.com).

One can also question the long-term effects of FDI. Although the host country will see a positive surge in their current account, the profits that the operations will produce will not remain in the host country. Multinationals