Globalization and third-world countries

This is a respond to the ReCom 3 magazine article by Lai Voon Seng. Although I disagree with some of Mr. Lai's arguments, his effort to put forward his thoughts in that magazine deserves praise.

Has globalization helped third-world countries?
We do not need to look any further, than our nation Malaysia, and our neighbours Singapore. Without doubt, Malaysia and Singapore would not have been what it is today without the presence of big global companies investing in both countries.

A huge percentage of our GDP is due to the electronics industry. And because of globalization and our government's smart policy of encouraging foreign direct investment, companies like Intel, AMD, and Dell are able to set-up factories in Malaysia.

Let's examine some of Mr. Lai's points. He argues that multinational corporations (MNC) use low-wage workers in developing countries. While it is true that workers at Nike factories in Vietnam are paid lower than their counterparts in the USA, we must also understand that Nike workers in Vietnam are paid much more than they would have been paid elsewhere in Vietnam. Also, it's hardly a sweatshop in local comparison since other manual labor jobs often invovle more sweat than a factory job. That's why so many people in poor nations are dying just to get factory jobs - its stable and they earn an income much higher if they were to work elsewhere in the country.

To understand whether globalization actually benefits a nation, we compare the scenario if MNC invest in a country and the other scenario if MNC does not invest. If Intel and other MNC did not invest in Malaysia, thousands of electronic factory workers would be unemployed and Malaysia wouldn't be as developed as it is today. The very fact that government in third-world developing nations are courting foreign investment and MNC clearly demonstrates that globalization, if done in a proper manner, can be a huge boost to the development and wealth creation of a nation.

Another of Mr. Lai's point concern the debt of third-world nations. Again, it is easy to fall prey to the argument that rich nations are taxing the poor nations too much by asking for interest payments. True, rich nations could probably do more to help poor nations, but the poor nations debt is due mostly to poor financial management and corrupt leadership, and not because of IMF imposing interest on debt.

Responsible developing nations need to borrow money to fuel development and if IMF does not lend money to these nations, development in these nations will be hampered.

In interest of space, I will not comment on the other points, but maybe other members can.

In conclusion, what we need is more responsible governments in developing nations, not less globalization.

[DecentMerson]

Originally Posted by prince

Also, it's hardly a sweatshop in local comparison since other manual labor jobs often invovle more sweat than a factory job. That's why so many people in poor nations are dying just to get factory jobs - its stable and they earn an income much higher if they were to work elsewhere in the country.

it is true that people in the West may regard low-paying jobs at Nike as exploitation, but for many people in the developing country, working in a factory is far better option staying down on the farm and growing rice....

but lets talk about sweatshop, the real sweat shop:

These are some of the working conditions in a factory (sweatshop)El Salvador:
1.)the factories were extremely hot and there was little fresh air, so that workers sometimes fainted. (still ok?)
2.)oung women, many under 16 years old, often had to work for 18 hours a day. (how's this?)
3.)workers who didn't finish enough clothes were yelled at and hit. (ur opinion?)
4.)women were forced to take contraceptives, or sometimes given contraceptives without knowing it, because the company did not want to pay maternity benefits... (still ok???)

that's in Spain, it is worse in Mexico, where girls as young as 12 work in the factories, when one man sick for a day, he loses a whole a week's pay, where one must work for 3 days without pay if he / she was late for 15 minutes

now, come to the third world debt.

Originally Posted by prince

True, rich nations could probably do more to help poor nations, but the poor nations debt is due mostly to poor financial management and corrupt leadership, and not because of IMF imposing interest on debt.

it is also true that it is due to poor financial management, but izzit the countries' or the IMF's and World Bank's???

The debt burden of developing countries has increased steadily since 1980s despite the various restructuring, rescheduling, and debt-conversion schemes put forward by the creditors.

These procedures when combined with IMF - World Bank policy-based lending were conducive to enlarging the outstanding debt of developing countries while ensuring prompt reimbursement of interest payments. (interesting????)

While money is supposed to be provided to "help countries to adjust". These World Bank load agreements come with tight conditionalities. If u want the money, u have to follow the rules.
The rules include encouraging countries to keep on importing large quantities of consumer goods, including food staples, from the rich countries. In other words, the money(loan) was not meant for investment in agricultural projects, but could be spent freely on imports of luxury goods. The result of this process was stagnation of the domestic economy, enlargement of the balance of payments crisis and growth of the debt burden...

of course, there's always another example that portrays the rosy side of the IMF and the World Bank.

Originally Posted by prince

In conclusion, what we need is more responsible governments in developing nations, not less globalization.

I do think so too... but i think globalization needs to be revised...

[__earth]

IMF and the World Bank is not globalization. They are just some international financial institute (IFI) that are supposed to aid globalization.

Anyway, I think you took a lot of things from Stiglitz's work and mistook those institutions as agents of globalization. No doubt those IFIs are not working properly but failure of the IFIs should not be regarded as failure of globalization.

it is true that people in the West may regard low-paying jobs at Nike as exploitation, but for many people in the developing country, working in a factory is far better option staying down on the farm and growing rice....

but lets talk about sweatshop, the real sweat shop:

These are some of the working conditions in a factory (sweatshop)El Salvador:
1.)the factories were extremely hot and there was little fresh air, so that workers sometimes fainted. (still ok?)
2.)oung women, many under 16 years old, often had to work for 18 hours a day. (how's this?)
3.)workers who didn't finish enough clothes were yelled at and hit. (ur opinion?)
4.)women were forced to take contraceptives, or sometimes given contraceptives without knowing it, because the company did not want to pay maternity benefits... (still ok???)

that's in Spain, it is worse in Mexico, where girls as young as 12 work in the factories, when one man sick for a day, he loses a whole a week's pay, where one must work for 3 days without pay if he / she was late for 15 minutes

Now, come to the third world debt.

That is labor abuse yes but have you ever thought of it as insufficient law enforcement?

The problem is not globalization per se but rather, its the local legislature. Without proper regulation in any country, any kind of abuse is possible. And with the presence of fierce competitive firms, weak legislation allows a space for abuse.

Some of the those stuff also happens in the US but it happens to illegal immigrants.

and, err, El Salvador is not on the same continent as Spain.

Originally Posted by DecentMerson

While money is supposed to be provided to "help countries to adjust". These World Bank load agreements come with tight conditionalities. If u want the money, u have to follow the rules.
The rules include encouraging countries to keep on importing large quantities of consumer goods, including food staples, from the rich countries. In other words, the money(loan) was not meant for investment in agricultural projects, but could be spent freely on imports of luxury goods. The result of this process was stagnation of the domestic economy, enlargement of the balance of payments crisis and growth of the debt burden...

Could you provide some hard evidence on the IMF or World Bank forcing borrowers to import goods from a *more expensive source*?

The World Bank and IMF does impose conditions on their loans, but the conditions are made to ensure that they get their money back. The WB and IMF are lenders, not givers.
In fact, this helps the borrowing nation because it instill financial discipline. Most of the time, the conditions are more transparency, cutting back on government spending on non-essential projects, and the reduction of deficit (that's probably one reason why Mahathir rejected IMF loans, his cronyism and poor handling of the economy would be revealed).

While reasonable people can disagree on whether the conditions of loan help certain nations, the IMF and WB have definitely played a crucial role in helping developing countries. Without these institutions, the growth of countries like Malaysia would be much lower (yes, we had much aid from the WB).

Here's a recent article by Prof. Rogoff, professor of economics at Harvard, on the IMF and World Bank. He argues that they should gradually stop acting as lenders, and instead create a sustainable mechanism in which sovereign countries can (efficiently) borrow money from international markets by themselves.

http://www.economist.com/displaystor...ory_id=2941379

[__earth]

Joseph Stiglitz is coming to Michigan!!!

w00t!

[el_empty]

Originally Posted by __earth

Joseph Stiglitz is coming to Michigan!!!

w00t!

but his textbooks kinda suck...

[__earth]

modigliani's sucks too. but they're still nobel prize in econ winners

[el_empty]

maybe they just need to outsource the job of writing textbooks to third worlds ... maybe india? heyy.. that's an idea.

[ElansarGelmir]

Finally, I found the topic that I was looking for the past 40 minutes...

Originally Posted by el_empty

maybe they just need to outsource the job of writing textbooks to third worlds ... maybe india? heyy.. that's an idea.

Early this year, I called up Travelocity.com to enquire about the refund for my airticket (the airline company that I bought my ticket from had gone bankrupt, unfortunately). The telephonist on the other end had a very strong indian accent, but I assumed that they hired an Indian worker who had just migrated to the US. Little did I know (I just realized it yesterday) that my call had been directed to India. And I'm surprised to find out that many companies, besides airline companies outsource technical-via-phone support tasks to India - a glimpse of globalization.

With jobs being outsourced, prices driven down to the world equilibrium level, my main concern is, how can Malaysia, or Malaysians, participate in the global economy? What do we have that can sustain us in this globalization era? What are we good at producing, besides walking textbooks (ok, bad joke)? Sorry if I sound like I'm paranoid here, but I sensed some threat coming from India and China at the moment (and I can even feel it here in the US).