Over the years, the concept of globalization has significantly expanded, and it has gained prominence in aspects such as trade and international relations between developed nations and developing countries across the world. Economic globalization can be explained as the increased interdependence between world economies in areas such as trade and the transfer of technologies. In modern times, economic globalization has been reflected in aspects such as foreign direct investments, commonly abbreviated as FDIs, free trade agreements, diversity in the labor markets, as well as regulatory frameworks on trade.
In understanding economic globalization in modern times, it is essential to explore some of the drivers of economic globalization and the tools that have facilitated market access and economic cooperation between nations. International trade agreements have been explained as powerful tools or drivers of economic globalization and cooperation between developing countries and developed nations across the world. These agreements serve as the bedrock of globalization, offering a regulated pathway for the exchange of goods and services on a global scale. The World Trade Organization (WTO), as an important entity that promotes economic globalization, stands as a powerful tool that explains the framework for cooperation between nations in the international arena (Zissimos, 2019). The role of WTO extends beyond being a mere facilitator of negotiations as it is the global custodian of rules that govern the conduct of participating nations, thus promoting fair and transparent trade practices. This means that the function of international trade agreements is not merely to open avenues for commerce but to provide a standardized structure for resolving disputes. Disagreements arising from divergent interests or perceived violations of established norms find resolution within the constructs of these agreements. The dispute resolution mechanisms embedded in such frameworks contribute to the maintenance of stability and predictability in the global economic landscape.
In addition, multinational corporations and global financial entities like the International Monetary Fund IMF have been explained as agents of globalizations since they help in bridging economies through investments and policies (Hernandez, 2019). Multinational corporations, in most cases, are , synonymous with globalization since they function as dynamic agents of globalization that transcend geographical constraints. The operations of multinational corporations extend beyond domestic borders, fostering interdependence among nations. These entities leverage cross-border investments to establish a global footprint, strategically positioning themselves to tap into diverse markets and capitalize on unique resources offered by different regions. This process fosters economic cooperation and further serves as a catalyst for the diffusion of technology, knowledge, and managerial practices across borders. According to LaPalombara & Blank (2019), these corporations play a transformative role in the economies of both developed and developing nations. In developed countries, MNCs contribute to economic growth by accessing new markets and diversifying revenue streams. They often serve as conduits for technological transfer, fostering innovation and efficiency. For example, a multinational corporation based in the United States or in Europe benefits the home country with increased revenue due to the repatriation of profits generated. On the other hand, in developing nations, MNCs can be drivers of economic development, injecting foreign direct investment, creating employment opportunities, and contributing to infrastructural advancements. Therefore, one can argue that MNCs are significant drivers of economic globalization since they foster capital transfer, the exchange of technologies, and the creation of interdependence between developed and developing countries.
In addition to MNCs, global financial entities exert remarkable influence over economic policies, significantly shaping the competitive landscape between nations across the world. The International Monetary Fund as a relevant example of a global financial entity that serves the functions as a global economic watchdog and a stabilizing force (Hernandez, 2019). Its interventions and policy recommendations have profound implications for countries’ economic trajectories, influencing fiscal and monetary policies, currency exchange rates, and overall economic stability. However, these global financial entities like the IMF have been subjected to criticism where critics argue that they prioritize economic stability over the welfare of the people. Despite the criticism, one can note that such financial corporations help in promoting the transfer of economic gains and technologies as well as interdependence between nations.
Focusing on the impacts of economic globalization, it is worth noting that developed countries gain significantly out of trade relations and access to new and emerging markets for their commodities. In the realm of international trade, developed countries leverage their economic might to access diverse markets, fostering the growth of industries and expanding the reach of their products and services (Ezeoha et al., 2022). The access catalyzes economic growth and further cultivates an environment where innovation and technological advancements flourish. The influx of new markets becomes a catalyst for the development of cutting-edge industries, propelling developed nations to the forefront of global economic leadership. Further, economic globalization makes developed nations acquire competitive edge over other rival firms from developing countries due to strategic access to raw materials and labor, among other factors of production. However, despite the benefits for developed nations, it is worth acknowledging that economic globalization can have some drawbacks for such nations. Even though outsourcing streamlines operational costs, it can concurrently result in job displacement within developed nations. This phenomenon triggers socioeconomic transformations with ripple effects across labor markets and policy landscapes. Job displacement raises pertinent questions about unemployment rates and the necessity for comprehensive policies that address the reintegration of the workforce into evolving industries.
Just like in the case of developed countries, developing countries also benefit significantly from economic globalization and increased interdependence between nations. Developing countries are the greatest beneficiaries of foreign direct investments, which is injected in aspects such as trade, production among others (Bello et al., 2023). Foreign investments inject much-needed capital, fostering the expansion of industries, the modernization of infrastructure, and the creation of employment opportunities. When strategically harnessed, FDIs become essential tools for these nations to break underdevelopment, propelling them onto the global stage as contributors to the world economy. Further, through transfer of skills, capital and infrastructural development, developing countries gain significantly in reducing their poverty levels. Inasmuch as developing countries benefit from developed countries and the interdependence with global players, there has been challenges such as economic exploitation and dependence which make economic globalization seem an unfavorable aspect in the modern world (Kyove et al., 2021). Developing nations, in their pursuit of economic growth, are likely to find themselves trapped in a web of economic dependence on foreign entities. The disproportionate influence of external actors can tip the balance of power, potentially leading to exploitation and unequal terms of engagement. The potential for exploitation arises from the inherent power dynamics between developed investors and developing hosts. As foreign entities wield economic leverage, there is a risk that the terms of investment may prioritize the interests of the investor over the socio-economic well-being of the host nation. Unequal bargaining power may result in unfavorable agreements, potentially leading to the extraction of resources without considerate benefits for the local population.
Focusing on strategic alliance between developed nations and developing countries, it is worth noting that there have been several instances where their collaboration has been successful. According to a 2023 World Bank report, US-based multinational corporations have engaged in strategic alliances with African countries to combat the impacts of climate change. This is an example of a case where countries, through economic globalization, engage in alliances that are designed to promote sustainable development in developing countries. However, there are instances that have exposed developing countries to competitive disadvantage through protectionism and the aspect of dumping. For example, the US has been imposing a 15 percent tariff on all imports, which has weakened trade relations between the United States and developing countries (Sánchez, 2023). While this protectionist move benefits US-based corporations, it has made it increasingly difficult for traders in developing countries to export to the United States. Such an example demonstrates how unequal trade practices have led to the disadvantaging of developing nations, further exposing them to cases of underdevelopment and adverse impacts of poverty.
From the above discussion and analysis, one can easily conclude that economic globalization unveils opportunities for growth and interdependence between developed and developing worlds. As noted in the discussion, the dual nature of globalization challenges a balanced insight and elaborate policymaking to ensure shared benefits between these nations. Looking forward, the trajectory of international economic relations demands a commitment to equitable and sustainable growth. Policymakers must navigate the complexities of interconnectivity, fostering cooperation while mitigating the potential divisive forces, thus designing a future where the global economy flourishes with fairness and resilience.
References
Bello, I., Shariffuddin, M. D., Othman, M. F., & Osman, N. (2023). Multinational corporations and sustainable development goals: An interventionist approach toward quality tertiary education in Nigeria’s case study (Etisalat). Innovation: The European Journal of Social Science Research, 36(3), 562-576. https://doi.org/10.1080/13511610.2023.2173151
Ezeoha, A., Akinyoade, A., Amobi, I., Ekumankama, O., Kamau, P., Kazimierczuk, A., Mukoko, C., Okoye, I., & Uche, C. (2022). Multinationals, capital export, and the inclusive development debate in developing countries: The Nigerian insight. The European Journal of Development Research, 34(5), 2224-2250. https://doi.org/10.1057/s41287-021-00500-2
Hernandez, C. (2019). Globalization, the IMF, and international banks in Argentina: The model economic crisis. Rowman & Littlefield.
Kyove, J., Streltsova, K., Odibo, U., & Cirella, G. T. (2021). Globalization impact on multinational enterprises. World, 2(2), 216-230. https://doi.org/10.3390/world2020014
LaPalombara, J., & Blank, S. (2019). Multinational corporations and developing countries. The Foreign Policy Priorities of Third World States, 133-150. https://doi.org/10.4324/9780429310980-7
Sánchez, J. G. (2023, August 16). American protectionism: Can it work? Epicenter. https://epicenter.wcfia.harvard.edu/blog/american-protectionism-can-it-work
World Bank. (2023, May 23). Multinational enterprises and climate change: Fundamental risks and big opportunities. https://www.worldbank.org/en/events/2023/05/23/multinational-enterprises-and-climate-change-fundamental-risks-and-big-opportunities
Zissimos, B. (2019). The WTO and economic development. MIT Press.
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