The Unfulfilled Promises of Globalisation

Globalization is the connection and integration of people, businesses, and governments all across the world. Because of advancements in transportation and communication technology, globalisation has accelerated since the 18th century. Many countries, according to proponents of globalisation, would benefit from opening up to international trade far more quickly than they would otherwise. When a country's exports fuel its economic growth, international commerce aids development. Many people around the world will live longer and have a higher level of living because of globalisation. Globalization will alleviate the sense of isolation felt by many individuals in developing countries and provide them with access to a wide range of knowledge (Stiglitz 4).

But people in poor countries have expressed concern that globalisation is not bringing the promised benefits to those who need them the most (Stiglitz 4). It has not succeeded in eliminating poverty or ensuring stability. All developing countries' economies and stability have been threatened by crises in Asia and Latin America. Many Latin American governments borrowed large quantities of money from financial institutions for industrialization in the 1960s–70s. Initially, developing countries obtained loans through public institutions such as the World Bank. Following 1973, private banks received a flood of capital from oil-rich countries that saw sovereign debt as a safe investment (Vincent and Rosser 342). Mexico borrowed against future oil earnings with debt denominated in US dollars, causing the Mexican economy to collapse along with the price of oil. Between 1975 and 1982, Latin America's debt to commercial banks grew at a rapid rate, increasing borrowing and causing Latin America's foreign debt to treble, accounting for 50 percent of the region's gross domestic product (The Debt Crisis in Latin America 69). Incomes and imports fell; economic growth slowed; unemployment grew to dangerously high levels; and inflation slashed middle-class purchasing power (Manuela and Garcia). In response to the crisis, most countries embraced the International Monetary Fund (IMF)-endorsed neoliberal strategy of providing money for loans and outstanding obligations. In exchange, the IMF pressed Latin America to implement changes that favoured free-market capitalism, worsening disparities and poverty (Ghosh 4). Government expenditure cuts exacerbated socioeconomic divisions in the economy and stymied industrialization attempts.

The Asian Crisis began with the financial collapse of the Thai baht in 1997, when the Thai government was forced to float the baht due to a lack of foreign currency to support its currency peg to the US dollar ("When the World Started to Melt: The Asian Financial Crisis"). Despite the fact that most Asian nations appeared to have strong fiscal policies, the IMF intervened to launch a $40 billion initiative to stabilise the currencies of South Korea, Thailand, and Indonesia, which had been particularly badly struck by the 1997 crisis. The IMF recommended extremely high interest rates. Following these crises, there is concern that financial contagion would spread around the world, with the collapse of one developing market currency leading to the collapse of others (Stiglitz 6). Globalization has come at a higher cost than its benefits, since the environment has been ruined and political processes have been tainted, and because the quick rate of change has left countries with little time to adapt culturally. Longer-term problems of social disintegration, from urban violence in Latin America to ethnic conflicts in other regions of the world such as Indonesia, have followed the crises that have resulted in widespread unemployment (Stiglitz 8).

Globalization is related with accepting American-style capitalism. Its proponents believe that underdeveloped countries must accept it if they are to thrive and effectively combat poverty, but in reality it has not given the promised economic gains to many in the developing countries. A widening gap between the haves and have-nots has resulted in a growing number of people in the Third World living in abject poverty. Despite repeated promises to reduce poverty throughout the last decade of the twentieth century, the actual number of people living in poverty climbed, which happened at the same time that total world income increased (Stiglitz 5), indicating a growth in inequality and inequitable capital distribution. Western countries have encouraged poor countries to remove trade barriers while maintaining their own, preventing developing countries from selling agricultural products and so robbing them of much-needed export revenue (Stiglitz 6). Russia's transition from communism to capitalism did not bring wealth, but rather poverty, and it turned out to be worse than expected. The contrast between Russia's shift, which was orchestrated by international economic institutions, and China's own design could not be starker (Stiglitz 6).

The IMF, which vowed to assist in such instances, has manifestly failed in its duty. It has not offered cash to nations experiencing economic downturns in order for them to return to near-full employment. Global instability has increased as a result of the IMF's premature capital market liberalisation, which occurred before the countries' industrial and agricultural sectors were able to develop robust and create new jobs. And, once a country was in crisis, IMF funds and plans not only failed to stabilise the situation but, in many cases, made things worse, particularly for the poor (Stiglitz 15), with terrible social and economic implications. Agriculture, for example, has been systematically devastated because it could not compete with heavily subsidised goods from Europe and America. Worse, the IMF's insistence on developing nations maintaining restrictive monetary policies has resulted in interest rates that, even in the best of circumstances, would make job creation impossible (Stiglitz 17), so exacerbating poverty-related problems.

It has become increasingly evident that globalisation as it has been implemented has failed to deliver on the promises made by its proponents. It has not always resulted in growth, but when it has, it has not benefited only a small segment of the population, the wealthy at the expense of the poor (Stiglitz 20).

Works Cited

• "Asian Financial Crisis: When the World Started to Melt." Euromoney, 2 Sept. 2020, www.euromoney.com/article/b1320d324dc5wg/asian-financial-crisis-when-the-world-started-to-melt.
• Bernal, Manuela Cristina García. "Iberoamérica: Evolución de una economía dependiente." Historia de las Américas. Universidad de Sevilla, 1991.
• Ghosh, Jayati. "The economic and social effects of financial liberalization: a primer for developing countries." (2005): 2006.
• Stiglitz, Joseph E. Globalization and Its Discontents. New York: W.W. Norton, 2002.
• The Debt Crisis in Latin America. Institute of Latin American Studies, 1986.
• Vincent, Ferraro, and Rosser Melissa. "Global Debt and Third World Development." World Security: Challenges for a New Century, edited by Michael Klare and Daniel Thomas. (1994): 332–355.