The world is arguably moving irreversibly towards integration. Although globalization has been defined as a process that can help developing countries better their wellbeing, it increasingly becomes clear that globalization (the current model) is actually creating many challenges for poor countries (Benuri 431). Theoretically, a liberalization of global economies is expected to empower poor countries due to sharing new technology, market accessibility and free movement of resources (Frankel 196).
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Unfortunately, the current process of globalization is built on a pre-existing model that has been exploiting poor countries over the last years (Castles 240). As it has been evident in the last decade, western countries will continue to guard their selfish interests against those of the developing world (Eichengreen 11). The 1999 UN report indicated that less than 20 poor countries had benefited from globalization (Kitson 233). The contribution of developing countries in the proportion of international trade decreased from 1.4% in 1970 to a mere 0.4% in 1995 (Kitson 233). Moreover, the gap in per capita earnings between poor and rich nations grew to over 70 times (Kitson 233).
The main drivers of globalization have been multinational companies (Charles 230). Globalization has enabled these organizations to increase their global presence, expand their market share, and increase their earnings (Herring 180).
The interest of multinational companies has primarily focused on increasing their net earnings at the lowest possible cost (Charles 230). Since small scale industries in developing countries cannot compete with powerful multinational companies that invade their markets, many small scale industries in the developing world have collapsed, thus, leading to loss of working places there (Dunning 54). Usually, multinational companies transfer a large percentage of their earnings to their home countries, hence, creating foreign reserve deficits in developing countries (Castles 240).
Questions are also raised in regard to the capacity of developing nations to exploit opportunities that will result from a globalizing world (Grassman 126). The presence of an educated populace in western countries is credited with developing creative business solutions that have helped to expand their country’s economies (Dunning 54). It remains doubtful if developing countries can have talented individuals who can make business solutions that would compete against those from the developed world (Harris 80).
Such reasoning is informed by the presence of low quality education in most poor countries and the lack of resources for promoting creative solutions there (Cosh 98). Since the global economy is increasingly moving towards a knowledge based economy, poor countries will increasingly find it difficult to develop businesses that can compete against those from rich nations (Charles 234).
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