Effects of Globalization to the Economy of Developing Countries
Globalization is the interaction of different nations allover the world with the aim of marketing their products as well as services. According to economics, it refers to transportation of goods as well as services to areas where potential customers can reach them easily all the time, without charging them extra cost for import or export and avoiding any barrier to trade.
Most researchers in the academic international development organizations and community academics have given views in favor of globalization process and its impacts to the developing countries.
However, these researchers have failed to give a withstanding support of the benefits derived by the developed nations from integrating with the globalised economy. In this paper, my attention is to focus on the pros and cons in the economy of developing countries due to globalization.
Benefits
Economic growth: Globalizations allows multinational companies to invest in different countries apart from their home country. During establishment of these companies in the developing countries, they pay taxes and other requirements fees to the government of the country in which they are establishing.
In addition, these companies are large and their production is high such that, they produce more than the countries requirement thus exporting the surplus for the nation to get export duties. The establishment of these companies in the developing countries creates employment to the citizens.
This further gives the government more sources of income through taxation of the employees as well as saving the government the burden and cost of creating employment to its population. Taxation of the employees is according to the amount of salary they receive, where those who receive more salary pay high amount of tax while those with low amount of salary pay less amount of tax.
Technology advancement: Globalization allows movement of labor from one country to the other. The developing countries have an advantage to outsource experts and professional in certain fields from developed countries. In addition, the globalization allows the movement of goods and services from one country to the other.
Developing countries are exposed to a huge a market of technological machines and tools from the developed countries. The developing countries acquire these machines and tools that they use in industrialization to make work easier and improve the quality of output. Similarly, the developing nations may acquire services that have been of great help towards the development of the developed nations.
Better Market Prices: The movement of goods and services across the border allows more goods and services in the markets, which increases the supply that makes the market prices low. The consumers thus enjoy better market prices for the goods and services because; the price offered are affordable.
In addition, the ease in market penetration make most producers sell their goods and services in the developing countries. The competition on the market from different producers’ goods and services make the prices low as every producer tries to influence the consumers to buy their goods and services.
Availability of Quality Goods and Services to the Consumer: Globalization creates increase in supply of goods and services in the markets of developing countries. The consumers find that they have a wide range of goods and services to choose. For the producers to win the market they improve the quality of their products and services to enable them overcome their competitors.
For instance, multinational banking institutions usually try to improve their quality services in order to overcome competition from local and other international institutions. The improvement of the quality of goods and services consequently improve the standards of living in the developing countries.
Harms
Brain Drain: The free movement of labor from one country to the other causes attraction of talents from the developing nations to the developed nation. Young, energetic and talented population that would have enhanced technological growth in the developing countries shift to the developed nations. This cost the developing nations a slow growth rate due to lack of enough expertise and professionals.
Stifle development: Developed countries tend to manipulate the developing countries due to overreliance of these nations on them. They put measure on what they are supposed to input to the developing nations or else they break the ties. The developing nations have to agree with the calls of the developed nations, as they cannot rely on their own. This cause slow development and growth in developing countries.
Increase in competition: The movement of goods and services in the markets increases the competition. The developed countries produce high quality goods and services because; they are well established and have high level of technology.
They also offer better and affordable prices compared to the producers from developing countries. The competition exposed by their commodities to the market cause a threat to the producers from developing nations.
Conclusion
Globalization is important to the developing nations as well as the developed nations. However, there is need for limitations and restrictions of the extent that globalization should reach. This would be of great help to the developing countries to enhance their development by avoiding over exploitation from the developed countries.