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Negative effects of globalization for developing country business

24 February, 2015 - 17:30

Critics of global economic integration warn that (Watkins, 2002, Yusuf, 2001):

  • the growth of international trade is exacerbating income inequalities, both between and within industrialized and less industrialized nations
  • global commerce is increasingly dominated by transnational corporations which seek to maximize profits without regard for the development needs of individual countries or the local populations
  • protectionist policies in industrialized countries prevent many producers in the Third World from accessing export markets;
  • the volume and volatility of capital flows increases the risks of banking and currency crises, especially in countries with weak financial institutions
  • competition among developing countries to attract foreign investment leads to a “race to the bottom” in which countries dangerously lower environmental standards
  • cultural uniqueness is lost in favor of homogenization and a “universal culture” that draws heavily from American culture

Critics of economic integration often point to Latin America as an example where increased openness to international trade had a negative economic effect. Many governments in Latin America (e.g. Peru) liberalized imports far more rapidly than in other regions. In much of Latin America, import liberalization has been credited with increasing the number of people living below the USD $1 a day poverty line and has perpetuated already existing inequalities (Watkins, 2002).