Does
globalization bring development to our economies? [Blog]
As the Roman politician
and philosopher Cicero once states, “Not to know what has been transacted in
former times is to be always a child”. Economic development requires people who
build a new future, rather than people who live for today. India’s economic
success is often attributed by the proglobalizers to its trade and financial
liberalization in the early 1990s; it has imposed restrictions on foreign
direct investments-entry restrictions, ownership restrictions and other
performance requirements i.e. local contents requirements. In addition, Chile’s
growth in post war was as the result of neo-liberal strategy. The government
provided exporters with a lot of help in overseas with a lot of help in
overseas marketing, research and development. It also used capital controls to
reduce the inflow of short- term speculative funds; although it’s recent free
trade agreement with the US has forced it to promise never to use them again.
Much of what happens in
the global economy is determined by the rich countries without even trying.
They account 70 percent of the international trade and make 70-90 percent of
all foreign direct investment. For instance, the Nigerian stock market which is
the second largest in sub Saharan Africa is worth less than one five thousandth
of the US stock market. During the industrial revolution, British banned
exports from its colonies that competed with its own products home and abroad.
It deployed policies to encourage primary commodity production in the colonies.
Moreover, it is the law of competition that people who can do difficult things
which other cannot, -ill earn more profit.
The Bretton Woods institutions
[BWI], International Monitory Fund and World Bank were set up in 1944 in New
Hampshire, now later deeply involved in virtually all areas of economic policy
in the developing world, BWI should be able to impose conditionality on
everything from fertility decisions, ethnic, integration and gender, equality
to cultural values- but conditions should be confined to only those aspects
that are most relevant to the repayment of the loan. BWIs should not take Henry
Ford’s approach to diversity. He famously said that,”Customers could have a car
painted any color so long as it’s black”.
Besides imposing tariffs, Walpole the 1721 prime
minister imposed an outright ban on advanced manufacturing activities that it
did not want developed. He banned the construction of new rolling and slitting
steel mills in America, forcing the American to specialize in low value added
pig and bar iron rather than high value added steel products
According to Ricardo,
in a brilliant inversion of commonsensical observation, argued trade between
two countries makes sense even when one country can produce everything more
cheaply than another. His theory fails when a country wants to acquire more
advanced technologies so that it can do more difficult things that few others
can do like when it wants to develop its economy. His theory is thus for those
who accept the status quo but not for those who want to change it. Richard
Cobden argued that without the Corn Laws, the factory system would in all
probability not have taken place in America and Germany. In other words Britain
adopted free trade place only when it had acquired a technological lead over
its competitors behind high and long lasting tariff barriers.
Though we have a wealth
of historical experiences to draw upon, we do not bother to learn them and
unquestioningly accept the prevailing myth that today’s rich countries
developed through free- trade, free market policy. Hamilton who became the US
finance secretary at only 33 years of age in 1791, proposed a series of measures
to be implemented:
·
Protective tariffs and import bans
·
Subsidies
·
Export ban on key raw materials
·
Import liberalization of and tariff
rebates on industrial inputs.
·
Prizes and patents for inventions
·
Regulation of product standard and
transport infrastructure.
 |
| Hamilton- US Finance secretary 1791 |
Without federal
government funding for research and development, the US would not have been
able to maintain its technological lead over the rest of the world in key
industries like computers, semiconductors, life science, the internet and
aerospace. Public enterprises have often been set up in order to kick start
capitalism, not to supersede it. When these government enterprises pick up, the
ownership and management should be left to the private individuals in form of
privatization. For instance, public-private
cooperation in Sweden continued in the development of telegraph, telephone and
hydro-electric sectors.
As far as
Heckscher-Ohlin Samuelson theory is concerned, The theory assumes that
comparative advantage arises from international differences in the relative
endowments of factors of production {capital and labor} rather than
international differences in technology. HOS theory also known as perfect
factor mobility depends on the assumption that productive means that capital
and labor released from one activity can immediately and without cost be
absorbed by other activities.
The main beneficiaries
of the opening up of agricultural markets in the rich world will be those rich
countries with strong agriculture-US, Canada and New Zealand. The popular image
that agricultural liberalization in rich countries is helping poor peasant
farmers in developing countries is misleading, because Poor countries only
receive; do not make foreign investment because their ability to regulate
foreign companies is reduced. The free international movement of capital
improves economic efficiency by allowing capital to flow into projects with the
highest possible returns on a global scale. Then the question remains; How do I
know it is the beginning of all things possible? Let’s find out!
