The flow of capital across borders has increased dramatically since the 1970s, so much that some say we are witnessing the “financialization” of the global economy. Overall, has the explosion of global finance benefited or harmed developing countries? Why or why not? What can states do to better manage the power of finance?
It is difficult to dwell upon the benefit or harm of the “financialization” of the global economy to the economies of different countries as the way the capital market functions in different countries are different. It should be stated that the Eastern countries were less dependent on the global flow of currency in comparison with the Western countries. Both Dani Rodrik and Joseph Stiglitz agree that those countries which contributed more to the development of the organizational economy win more now. Eastern countries were those countries who “invested a larger share of GDP and maintained macroeconomic stability” (Rodrik 307).
This statement helps to say that those countries who had difficulties in the countries wanted to involve the global economy as a helpful source of finances. Therefore, contributing to the world economy these countries expected to get more in the future. This is exactly what happened.
The explosion of global finance contributed to the developing countries in the way that they have been present at the international market for many years while the developed countries have realized the importance of the international capital market when the globalization of the economic relations became obvious. Therefore, the developed countries hoped for their finances, but the increase of the flow of capital across borders has not left them any chance.
They were to make their financial relationships international. The political situation in the world also contributed to the globalization of finances. The modern world has changed since the 1970s. Modern economical and political relationships are directed at globalization and this is correct. The tendency in the modern world is in uniting or at least making the economies of the countries subjected to global economics. The priorities of such relationships in the financial aspect are numerous.
The global market created additional opportunities for international companies that have been created all over the world. The currency has also become an international destination and the prices of different countries depend on the financial situation in various counties as well. The advantage is the dependency as it presupposes cooperation and mutual support. The cross order finances have promoted the growth of the countries which could not hope on their finances.
The contribution to the economies from other counties made it possible for the developing countries to improve the education, health care, and other social institutions that could not be reached based on the personal county’s finances (Stiglitz n.p.). Therefore, the advantages of the globalization of the financial market and the flow of the finances across the broad are contributions for the countries which are in the developing position.
Works Cited
Rodrik, Dani. “The New Global Economy: and “Has Globalization Gone too Far?”
Stiglitz, Joseph. “Globalism’s Discontents.” Globalization Reader 2002. Web.